TEA appeals to extend date of interest subvention on export credit
The Reserve Bank of India has issued a directive DBOD.Dir.(Exp.)BC.No.27/04.02.01/2007-08 dated August 1, 2008 which directs that Interest Rates Subvention Scheme on Export Credit would be brought to a close with effect from September 2008.
The RBI's Circular is bolt out of the blue to exporting units and it has come at a time when the banks are revising their Prime Lending Rate (PLR) upwards further to RBI's announcement on increasing the Repo Rate and Cash Reserve Ratio (CRR) to curb the inflation.
We wish to mention that the hiked petroleum products subsequent to the spiraling oil prices in global market, dearer cotton rates are the major cause of concern and ultimately, these adverse factors have led into escalation of all input cost, cotton yarn cost, power cost, transaction cost and processing charges.
Sir, for example, the following comparison table apparently reveals the price changes taken place in the past three months for manufacturing a 100% cotton Knitted Polo T-Shirt.
Click here to view table:
We wish to note that though there is a depreciation of rupee against dollar by 4.85% in the past three months ( as on May 01, 2008 Dollar rate was Rs. 40.19 and as on July 31st 2008 the dollar rate was Rs. 42.14 ), the benefit arisen has not really percolated to most of the garment exporting units as they have entered into forward booking for nine months based on the prediction of economists, advise of banks, reputed Financial Consultants and various reports saying that the rupee would touch Rs. 36/- against per dollar shortly. Owing to this, the exporters are literally not in a position to enjoy the benefit out of it.
Also, you are aware that Tirupur exporters have alone lost more than Rs. 100 crores in derivatives deals and again we wish to emphasise a point that the exporters had resorted for derivative deals mainly to offset the losses may incur due to continuous falling of rupee against dollar.
Sir, the bone of contention is that the garment exporting units are no way in a position to increase the price of the garments as prices were decided and quoted nine months to one year back and it could not be altered proportionately to meet out the rise in input costs and transaction costs.
Moreover, the exporters had worked out and given their costing to buyers based on the RBI's Circular DBOD.Dir.(Exp.)BC.No.73/04.02.01/2007-08 dated April 25, 2008 informing that the interest rate subvention on export credit would be extended for one more year from April 01, 2008 to March 31, 2009.
Considering the crisis swallowed up the garment exporters, we request yourselves not to withdraw the interest subvention benefit and kindly issue an another circular immediately by giving an exemption to garment exporters and extend the interest rate subvention on export credit upto March 31, 2009.
Tirupur Exporters' Association