The Hindu Business Line : Relief package: Garment exporters may recover some losses

Although garment exporters feel the Finance Ministry’s relief package for exporters (in the wake of a strengthening rupee) comes a little late and more sops could have been given, the general feeling is that of relief and hope.

The consensus in the garment exporting community is that the decisions to reduce interest rate on pre- and post-shipment credit by two percentage points and the hike in duty drawback rate will help the industry recover at least part of its losses.

Mr Rajendra Hinduja, Director, Gokaldas Exports, said the three per cent increase in duty drawback rate (refund of customs duty paid for imported goods that are later exported abroad) will bolster the bottomline by three per cent. The two percentage points interest relief will also add 0.5 per cent to the bottomline.

“In all, we can expect a 3.5 per cent increase in bottomline. I only wish the Government had come out with these announcements earlier,” said Mr Hinduja.

Losing crores

The garment export industry is estimated to have lost orders worth Rs 1,500 crore, as many exporters had to turn down orders, since they did not want to operate at low costs. Mr Hinduja said Gokaldas could have lost orders worth at least a couple of crores.

With garment exporters operating at net margins of just 7-10 per cent, the rupee appreciation has affected the industry badly. Net realisation has been shaved off by 10 per cent with the rupee becoming stronger by 10 per cent.

Welcoming the decisions to help exporters reeling under the rupee surge, Mr Vikram Rao, Director, Aditya Birla Nuvo (Madura Garments Exports is a wholly owned subsidiary of Aditya Birla Nuvo), said a five per cent hike in duty drawback rate would have been “more appropriate”. Nevertheless, these are “steps in the right direction and one now hopes the government would go the full distance,” he said.

Last year, Madura’s exports touched a turnover of Rs 170 crore. Although the company had earlier set an export target of Rs 300 crore this year, going by current indications, revenues could settle at Rs 250-270 crore, said Mr Rao.