Govt help can turn crisis into opportunity for exporters

22 Jan '09

3 min read

In the last few years the Indian exporters have been able to create a niche for themselves in global markets. This comes from delivering products of exceptional quality as well as on time at competitive rates. According to experts, this acceptance can be turned in to an opportunity by these exporters.

For instance, for the last many years, Indian textiles have been well accepted in international markets for their exceptional quality, so even if these products were to be expensive by a small margin, the buyers would still flock to Indian shores, since the domestic exporters have created a very good reputation for themselves.

But the current price difference, when compared with those of other countries is very much on the higher side to entice an international buyer. This price difference comes from the high cost of basic raw materials which normally account for 50-60 percent of a finished product cost. Other than raw material costs, high logistics and capital costs are hampering the growth of the industry.

Indian cotton is priced at least 14-15 percent higher than those prevailing in global markets. In the new cotton season that began a few months ago, the government decided to increase the Minimum Support Price (MSP) of cotton by a whopping 25-40 percent which resulted in increased pressure on the textile exporters.

The other most important raw material, Polyester fibre also attracts a 5 percent customs duty in addition to 4 percent special additional duty (SAD). But here again, the exporter is not able to avail the benefit of using the advance license system and benefit from buying raw material from global markets as, he looses the drawback given in lieu of other duties and taxes paid by him

The other most important cost centre is the cost of transportation. It is cheaper to ship material to nearby foreign countries from the nearest port, than transporting the same volume within the borders of India by road. The other issue confronting the textile exporters is refund of state taxes and duties.

While the central government refunds the duties and taxes it receives from the exporters, it would help the exporters if the states were also to do so. High working capital costs also add to the already lofty overheads the textile industry is incurring. The exporters are in position to deliver exceptional results if they could access dollar loans at affordable rates.

All these factors, if looked in to by the government of the day, could help the exporters ride out the crisis and at the same time grab competitor shares, since the other two major countries like China and Pakistan are facing problems of their own which is nullifying their competitive spirit and thereby could prove to be an prospect for Indian textile exporters, to turn crisis in to an opportunity.

Fibre2fashion News Desk - India

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