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'Forex dealers should reimburse exporters' - Mr Vaid, AEPC
23 Dec '08
2 min read
The Apparel Export Promotion Council (AEPC) said today that many garment exporters suffered heavy losses in recent weeks due to using the derivative mode in foreign exchange market.
"The industry has faced financial losses on account of derivative option offered by various authorised dealers, a scheme duly approved by the Reserve Bank of India (RBI)," said AEPC's chairman Rakesh Vaid.
The quantum loss is close to eight to ten per cent of the export turnover where exporters used the derivative mode to the extent of 25 to 30 per cent, he said in letters to Prime Minister Manmohan Singh, Commerce Minister Kamal Nath and Textiles Minister Shankersinh Vaghela.
Mr Vaid said the authorised forex dealers should be asked to share half of their profits with those exporters from whom they have earned this amount. "Banks have made enormous profits at the cost of garment exporters though they have not lost when the currency remained stable."
Till April last year, garment exporters were exposed to volatile currency market fluctuations. To safeguard their interests, authorised dealers introduced options like derivatives and forward bookings. Exporters have to surrender twice the quantum of foreign currency in case the rupee depreciates over the rate agreed in the derivative mode.
"Since the dollar, euro and other currencies were not projected to depreciate against the rupee, exporters had no option but to opt for derivatives," said Mr Vaid. Various schemes approved by the RBI led many garment exporters to opt for them.
With the Indian currency depreciating more than 20 per cent in calendar year 2008, some experts say that losses from complex derivative products could wipe out their turnover in many cases. Portfolio investors took out more than 14 billion dollars from Indian equity markets as the global financial crisis escalated, causing the rupee to fall sharply and crossing Rs 50 to a dollar at one point.
The AEPC chairman said the apparel export sector employs over seven million people but is suffering heavily due to the global economic recession and consequent falling sales in the United States and Europe. He hoped the government will soon come up with another stimulus package for the revival of textile and clothing industry.
India is the sixth largest exporter of readymade garments worldwide. Nearly 9.7 billion dollars worth of apparels were exported to over 100 countries last year. The AEPC has more than 8,000 small, medium and large exporters as its members.
"The industry has faced financial losses on account of derivative option offered by various authorised dealers, a scheme duly approved by the Reserve Bank of India (RBI)," said AEPC's chairman Rakesh Vaid.
The quantum loss is close to eight to ten per cent of the export turnover where exporters used the derivative mode to the extent of 25 to 30 per cent, he said in letters to Prime Minister Manmohan Singh, Commerce Minister Kamal Nath and Textiles Minister Shankersinh Vaghela.
Mr Vaid said the authorised forex dealers should be asked to share half of their profits with those exporters from whom they have earned this amount. "Banks have made enormous profits at the cost of garment exporters though they have not lost when the currency remained stable."
Till April last year, garment exporters were exposed to volatile currency market fluctuations. To safeguard their interests, authorised dealers introduced options like derivatives and forward bookings. Exporters have to surrender twice the quantum of foreign currency in case the rupee depreciates over the rate agreed in the derivative mode.
"Since the dollar, euro and other currencies were not projected to depreciate against the rupee, exporters had no option but to opt for derivatives," said Mr Vaid. Various schemes approved by the RBI led many garment exporters to opt for them.
With the Indian currency depreciating more than 20 per cent in calendar year 2008, some experts say that losses from complex derivative products could wipe out their turnover in many cases. Portfolio investors took out more than 14 billion dollars from Indian equity markets as the global financial crisis escalated, causing the rupee to fall sharply and crossing Rs 50 to a dollar at one point.
The AEPC chairman said the apparel export sector employs over seven million people but is suffering heavily due to the global economic recession and consequent falling sales in the United States and Europe. He hoped the government will soon come up with another stimulus package for the revival of textile and clothing industry.
India is the sixth largest exporter of readymade garments worldwide. Nearly 9.7 billion dollars worth of apparels were exported to over 100 countries last year. The AEPC has more than 8,000 small, medium and large exporters as its members.
Apparel Export Promotion Council
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