The Hindu Business Line : Karur home textile units see 35% drop in US exports

Coimbatore, Feb. 6 The textile and clothing industry is in a paradoxical situation today. Said to be the worst victim of the global economic crisis, the industry, which registered huge investments of over Rs 1-lakh-crore over the last three years, is today encountering one of its toughest periods in recent years.

Industry captains say they have not come across such gloom in their life time. “The ups and down in business cycle is understandable. We are yet to comprehend the present scenario. It is new and we are unable to predict which way this wind of change would sway,” say home textiles exporters in Karur.

“The impact of the slow down has just started to surface, although we started feeling the pinch since March last year.

“There is a demand slump of 25-30 per cent in our exports to the US and the overall drop in exports could be around 35 per cent,” said the President of Karur Textile Manufacturer Exporters’ Association, Mr V. Kumar.

Exporters agree that the home textile product range is not a necessity and buyers/importers could therefore afford to postpone purchases. “People, who were earlier reluctant to re-use home furnishings, have now started to use the same furnishing for longer period, because their buying power has come down,” observed Mr Kumar.

This postponement has started to result in cancellation/delayed shipment, demand for lowering of price (up to 3 per cent), longer credit period and some uncertainty.

Export volumes, they say, fell by 5 per cent in 2006-07 and further by 10-15 per cent compared to the earlier year in 2007-08.

The drop in volumes during the current fiscal is expected to be around 30 per cent.

Select exporters have shifted focus to the domestic market. Mr Kumar, however, points out that they cannot expect volume growth in the domestic arena.

Asked what textile exporters needed at this juncture, Mr M. Sivakannan, President, Karur Textile Forum and Managing Director, Amaravathi Textiles, said, “the fringe benefit tax and service tax has added to our woes.

Though the Government announced some service tax relief in December, it should be with retrospective effect and the amount of service tax paid from April last should be refunded at the earliest.”

“The refund procedures are cumbersome and some of the clauses unreasonable. This could result in rejection of most applications citing lack of proper evidence,” he said and stressed the need to waive the fringe benefit tax.

Duty drawback should be increased by at least 4 per cent to make prices globally viable and interest on term loan reduced to 9 per cent, he said.

The Forum has also sought a two-year moratorium on repayment of term loan.

‘The Focus Market Scheme has not taken off in the expected way. There should therefore be more intense bilateral dialogues with the importing countries at the ministerial level. An intense drive for Indian awareness should be taken up by conducting fairs and conferences,’ he suggested.

Mr. M. Nachimuthu, Chairman, Karur Textile Park and Managing Director, Atlas Export Enterprises said providing adequate infrastructure excellence in export hubs such as Karur, Tirupur, Madurai, Kannur, Jodhpur, Panipet, Ludhiana and Kekhra should be taken up on a war footing.

He also emphasised the need to include home textile made ups in the Focus Product Scheme, even though these are made from powerlooms, because of the uniqueness of these products.

“We need a separate platform,” said Mr Kumar.

Even while describing the present as ‘adverse market sentiment and fear,’ the Textile Forum representatives said “if only the Government sets it mind to support the industry, we will be out of the woods in say 6 to 8 months.”

On the stimulus package, he said “the first package was an eye-wash. There is nothing really in it and the second offers nothing for the textile sector.”

Asked what the players proposed to do, Mr Prem Anand, Marketing Manager, Amaravathi Textiles said “we have invested quite a bit on technology. This correction phase will give us time to restructure and reorganise ourselves, explore newer markets and opportunities, cut cost and innovate. It is a time to rewind”.

While stating “Government support is needed to bail out this sector,” he also pointed out that the TUF scheme was one of the toughest schemes. “Most of us have not got our interest subsidy yet,” he said

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