The Hindu Business Line : Panel to study impact on engg exports

Engineering Exports Promotion Council (EEPC) has set up a task force (comprising four members from each region) under the chairmanship of Mr Rakesh Shah, immediate past Chairman of the Council, to study the impact of the global economic crisis on Indian engineering exports. Demand for Indian engineering goods has show a perceptible dip in traditional markets of US, Europe and South East Asia.

The task force has been constituted mainly to survey the current export pattern post meltdown in terms of both value and volume. A key element of the study would be to understand how the banks were now looking at export finance for the SMEs, who dominate export production in the engineering sector.

Talking to Business Line here recently, Mr Rakesh Shah said the current order book position does not look good, especially since engineering goods exports traditionally command a longer gestation period.

He said job cuts have begun to haunt the engineering sector workforce, and a number of engineering exporters were now travelling perforce to the US, the principal market for Indian engineering goods, to assess first hand the financial strength of the US buyers in these difficult days. According to him, ECGC (Export Credit Guarantee Corporation) open cover for exports to the US was longer available.

Pointing out that the element of development banking was totally missing, with banks’ focus mainly on fixed assets, other collaterals, credit limits etc.

The mounting forex woes despite a weak Indian rupee, Mr Shah said the SMEs which dominate the engineering export sector cannot afford to appoint independent treasury managers for hedging purposes.

“And all of us who hedged against a strong rupee in the past (at anything between Rs 39 and Rs 43 a dollar), as desired by the then finance minister who urged the exporters to learn to live with a strong rupee, have come to grief in this situation of nearly Rs 50 to a dollar.”

He said, roughly, value to the tune of nearly 60 per cent of exports (in the engineering sector) was hedged, especially by big players such as Tatas, L&T, TVS Sundaram etc and all of them have lost out in varying measure. The rupeee in the last one year (October to October) has depreciated by 24 per cent.

An additional fear for the engineering goods exporters was over the large scale dumping by Chinese companies, whose orders to the US are said t have shrunk substantially in the wake of the financial crisis..

‘export and perish’

Describing the current situation ironically as ‘export and perish’ rather than ‘export or perish’, as it used to be, the former EEPC chief said the moment the rupee nearly touched the Rs 50 threshold, US buyers were asking for a discount, thinking we are raking in the moolah without much effort.

Asked on the immediate impact of the global economic slowdown, he said engineering exporters were now looking at the domestic market seriously, as inventories are mounting.

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