Economy

Lockdown tears into leather, apparel, handloom exports

TE Raja Simhan Chennai | Updated on June 29, 2020 Published on June 29, 2020

Many small companies depend only on exports

Shortage of labour, disruption in logistics delay shipments to major markets

The lockdown has crippled leather, apparel and handloom exports due to shortage of labour and disruption in logistics, delaying shipments to major markets like Europe and US.

The leather industry had suffered nearly $1-billion export order losses due to the Covid-19-induced lockdown. Shipments for Christmas and New Year and crucial samples for the Spring (new) collection in Europe are being delayed, said industry sources.

April to August are crucial months during when shipments for the festival season, and for the new Spring collections are despatched. However, this has not yet happened, said Jay Kumar Singh, Managing Director of Chennai-based Shivam Apparels.

“Any further lockdown will be a disaster for the industry,” he said. In Chennai, there are 75-100 units manufacturing leather products like garments, bags, and wallets, said Singh.

Echoing a similar view, Sanjay M Lulla, Managing Partner at SM Lulla Industries Worldwide, a Chennai-based exporter of leather garments, said orders have come from European clients but there is a shortage of labour. Several of them have left for their native places with no indication of when they will return. The lockdown restrictions have made it difficult for local employees to come to factories.

The government has allowed units to function, but the staff need to stay at the factory or nearby. This is not possible, given that over 85 per cent of employees are women, he said.

Many orders have been cancelled due to lockdown in Europe, followed by lockdown in India. Global clients work on dual sourcing policy. If Indian companies cannot supply, they will source from China or Taiwan, he said.

High freight cost

The lockdown restriction has also affected movement of goods by sea. “We are planning to ship goods by air to save time. However, this is going to escalate the operations cost significantly due to high freight cost, which has increased by three to four times,” he said.

The lockdown has created so much uncertainty even as clients are demanding supply on time, said M Israr Ahmed, Regional Chairman (South), Council for Leather Exports, and Director of India Shoes Exports Pvt. Ltd. Any further extension of the lockdown will cripple the industry, he added.

Major markets of Europe and the US (to which 70 per cent of leather exports are sent), have now opened up and buyers have placed export orders. However, exporters need to ensure that the products are shipped per commitments. Else, further orders will be lost to China or Vietnam, he added.

Cancellation of orders

Prabhu Damodaran, convenor of Indian Texpreneurs Federation (ITF), that represents the textile industry of Tamil Nadu, told a news channel that a complete lockdown should be avoided at a time when exports are recovering. It will affect the economy badly. After two months, many factories are now working with half the employee strength, he said.

Nishanth Jain, Secretary, Apparel & Handloom Exporters Association, the industry body for over 400 MSME apparel exporters from Tamil Nadu, said during the lockdown from March till mid-May, the industry suffered huge losses on account of order cancellations by many international clients.

The current lockdown in Chennai, Kanchipuram, Chengalpattu and Thiruvallur districts has caused immense delays with the international clients not being able to get the deliveries of goods they were supposed to get by the end of June. This will now have a cascading effect on the deliveries of goods in July, August and September.

The goods being manufactured have to be exported between June and September so that they can be put up in the overseas shops overseas from August to November in time for the holiday season and Christmas, he said.

Any further lockdowns in Chennai and its surrounding districts will result in a very huge number of large-scale order cancellations (about $150 million) for exporters. Buyers will move to the competing countries to source their goods, said Jain.

Published on June 29, 2020
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