The Hindu Business Line : ‘Rising rupee forcing Tirupur exporters to lay off workers’

Recently in Tirupur To offset the effect of rupee appreciation, exporters in Tirupur are laying off workers on one hand and roping in production engineers from countries such as China, Vietnam, Cambodia and other places on the other to increase productivity with limited workforce.

“We are trying to increase our productivity by bringing in production engineers from those countries,” says Mr A. Sakthivel, Chairman, Tirupur Exporters Association.

Mr Sakthivel has been advising exporters to supply to the US buyers, even if it means not making a profit. US is a big market and if the buyers move over to other sources of supply, “it will be very difficult to bring them back to us.”

According to Mr Sakthivel, the exporters in Tirupur are now operating on 2 to 3 per cent margins. It used to be at least 10 percentage points more.

When asked about exploring new markets in Europe and countries such as Australia, Latin American countries and Japan, he said they are all small markets. For example, Australia is a 20-million people market. “Even Europe cannot give us volume as the US does. Africa may not be viable as they want LC for 365 days. However, we are now exploring new markets in Europe and Down Under to offset the dollar-rupee impact to an extent.” Taking advantage of the gaining rupee, now even some of the existing buyers in Europe want to pay in dollars, he says.

Mr Sakthivel says even hedging is expensive. If the fall is sharp, hedging would be beneficial, he adds.

Job loss

According to him, there are about 3,000 exporters, predominantly knitwear, in Tirupur. As a result of the rupee-dollar issue, over 10,000 workers, most of them are migratory labourers, have lost their jobs so far, “and if the situation continues, another 40,000 could face lay-offs by March next year,” Mr Sakthivel says.

There was some kind of protection for these exporters when the quota system was in place, he feels. Now one can get T-shirts from any country including Sri Lanka, Cambodia, Vietnam and China.

During 2006-07, Tirupur exported goods worth Rs 11,200 crore. But this year, it is expected to be at Rs 9,500 crore, against the targeted Rs 12,500.

“We always lived in a world where rupee has only been depreciating. We are not mentally prepared for this kind of situation. Now we have been conducting workshops periodically to impart and familiarise ourselves with currency hedging mechanism, forward contract techniques and other possibilities to minimise the impact,” he says.

The association wants, “at least for another six months, until we establish ourselves and get orders from new markets,” the Government to exempt exporters from service tax and FBT. “The Government can even have dual exchange rate and peg rupee rate at Rs 42 per dollar for exporters at least for another six months, until we get orders from new markets and establish ourselves,” he says.

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