The Hindu Business Line : Garment export council calls for hike in duty drawback rates

New Delhi, Dec 1 The country’s garment export industry apprehends a shortfall of 24 per cent to the target of $11.62 billion set for the current fiscal, in the wake of the worrisome declining trend in exports due to domestic disabilities in the form of high transaction cost and lack of supportive policy measures to cope with the anaemic overseas demand.

The Apparel Export Promotion Council (AEPC) Chairman, Mr Rakesh Vaid, on Thursday said in the current fiscal export would be just 91 per cent of the actual achievement in 2007-08.

Last fiscal, India exported garments worth $9.69 billion, which was over 9 per cent than in 2006-07.

But the financial market meltdown in the US and Europe is impacting the Indian garment industry with lakhs of workers being laid off, he added.

Layoffs

Hence, the council called for a hike in duty drawback rates, research and development assistance of six per cent and income tax exemption for five years to offset the huge losses piling up due to the current global economic slowdown.

According to industry estimates, nearly seven lakh workers in the clothing and textile sector have lost their jobs in the past five months.

By March 2009, another five lakh could lose their jobs due to falling sales overseas. The sector generally employs about 33 million people directly and another 55 million indirectly.

Of these, seven million are involved in readymade garment manufacturing — 3.9 million for exports and the rest for domestic market.

“If no steps are taken now, then March 2009 will be too late and there could be a huge unemployment problem in the sector,” he added.

Due to rupee depreciating against US dollar, the results were positive in rupee terms with readymade garments worth $4.87 billion being exported from India during the first half of the current fiscal, up 7.04 per cent from $4.56 billion in the corresponding period of the previous year.

In rupee terms, exports were Rs 20,760 crore, up 11.47 per cent from Rs 18,631 crore during April to September 2007.

Winding up outlets

“Many buyers like Steeve and Barry’s along with Mervyns have filed for bankruptcy and more are expected,” said Mr Vaid.

Pacific Sunwear has closed 150 stores while Lane Bryant, Fashion Bug and Catherines are closing 150 outlets, which are under-performing. Foot Locker is winding up 140 stores and Ann Taylor is closing 117 outlets.

Many others such as Eddie Bauer, Cache, Talbots, J Jill, Gap Inc, Foot Locker, Goodbye Levitz, Home Depot, Macy’s, Pep Boys, J C Penney, Lowe and Office Depot are scaling down operations as well due to falling sales.

Depreciating rupee

The falling rupee has not helped either, said Mr Vaid. A large number of exporters had hedged their exposure and though the rupee is hovering between 49 and 50 against the dollar now, the actual realisation is between Rs 41 and 42. “The export contracts, for which foreign remittances are being received now, were signed in May or June.

In the absence of an alarm system for conversion rate, exporters could not anticipate the exact exchange rate,” he said.

Overseas buyers are now renegotiating contracts due to depreciating rupee. So free-on-board values are falling, said Mr Vaid.

On the other hand, neighbouring countries such as China and Pakistan are helping their industries with export incentives.

In India, however, the Government cut duty drawback rates from September 1. The rate for cotton apparel declined from 11 per cent to 8.8 per cent, for blended apparel from 11.2 per cent to 9.8 per cent and for synthetic apparel from 11.5 per cent to 10.5 per cent, he said.

More Stories on : Readymade Garments | Exports & Imports | Other States

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page