GEA utters concern over withdrawal of export Sops
Mr. Surinder Anand, Executive Secretary, Garments Exporters Association has expressed serious concern on the recent withdrawal of some of the export sops earlier granted to exporters.
He further said that the interest rate subvention on export credit and higher duty drawback and DEPB rates should have continued because of steep hike in the cost of production of exporting units which is still going higher. The recent steep hike of about 40 per cent in the Minimum Support Price of cotton would lead to further increase in the input manufacturing cost of exporters.
The poor performance of exports during the year 2007-08 and uncertainty about the future performance reveals a very gloomy picture. The garments exporters are going through a serious crisis which is threatening their very existence. Exporters have been weighed down by serious financial burdens resulting directly from the fiscal measures of the Government.
The increasing input costs, hardening of interest rate and unfavourable credit policy, high transaction cost, poor infrastructure, rigid and outdated labour laws, high power cost and frequent power cuts, increasing cost of wages and the slow down of overseas markets are some of the difficulties being faced by exporters which should be mitigated to the extent possible and a long term solution should be finalized for the efficient functioning of exporters.
The global currency market more particularly Indian currency has moved in unexpected way during the last one year. The appreciation in the value of rupee against dollar was very sharp and significant and the depreciation is also very steep and unexpected.
The exporters would have to face the current violent situation in the exchange rate market as uncertainty about the future rates continues. Many exporters, who tried to hedge their currency risk by executing forex derivatives contracts with banks, suffered huge losses as they were not experienced in finalizing such contracts with the banks and were expecting only minor variations in the value of rupee.
The depreciation of the rupee will not benefit in the short run as most of the overseas contracts have already been finalised by the exporters. The recent slow down in the US, E.U and other overseas market has affected the realization from overseas buyers who are now insisting on discounts after the depreciation of the rupee.
On the other hand Government has already withdrawn some of the benefits which were granted when rupee appreciated last year. GEA has, therefore, requested the Government to continue with the export sops including the interest rates subvention and higher duty drawback rates at least till 31st March, 2009.
To combat the fluctuation in the value of rupee a careful assessment and close monitoring of the exchange rate should be undertaken by the RBI to ensure that financial flows do not adversely affect the exporters or importers. Our exchange rate policy should be guided by careful monitoring of exchange rate by the RBI.
Infact, the time has now come when, RBI should intervene more decisively in the currency market to curb undesirable movements. There is an urgent need to make sincere and serious efforts to ensure financial stability in the external sector along with the much emphasized need for price stability in the domestic sector. The sudden and sharp fluctuation in the exchange rate is good neither for the importers nor for the exporters.
GARMENTS EXPORTERS ASSOCIATION