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India's AEPC seeks stimulus package covering wages, credit
03 Apr '20
2 min read
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Indian apparel exporters have urged Prime Minister Narendra Modi to immediately come out with a specific financial stimulus package to help the industry and its workers survive the impact of COVID-19 on export orders, shipments, payments and liquidity. Apparel Export Promotion Council (AEPC) chairman A Sakthivel wrote a letter to Modi in this regard.
"Unless the government immediately announces an economic package with specific focus on the apparel export sector, given the fact that industry's products are ‘perishable’, our industry ... will die a slow death," Sakthivel said in his letter.
He said overseas buyers and buying houses are either cancelling or postponing confirmed export orders and are also holding back or indefinitely deferring payment for goods already shipped or ready-to-ship, besides asking for hefty discounts.
The cancellations and postponements of shipments have eroded packing credits and impacted exporters' fund-liquidity position, which is in a precarious condition, as cash flows have completely stopped, he said.
About 70 per cent of apparel units in the country are micro, small and medium enterprises (MSMEs).
"Labour forms the single largest component of product costs in the industry, with wages amounting to 25-30 per cent of the cost of production. Further, units operate at thin margins of 3-4 per cent, and are completely dependent on export benefits granted by the government," a news agency quoted Sakthivel as saying.
"Wages may be made out of the ESI [Employees’ State Insurance] funds we have been paying regularly over the years. The Atal Bimit Vyakthi Kalyan Yojana (ABVKY) Scheme of the Government is understood to have huge reserves of about ₹91,000 crore from contributions made by employees and employers. The same may kindly be utilised along-with reserve funds for payment of wages," he added.
AEPC has urged the Government to pay for the employer’s portion of Employees’ Profident Fund from March to June, irrespective of the number of workers employed. It also urged the government to contribute towards salaries of employees for six weeks, or till normalcy resumes. It also wants the packing credit period for existing loans and export bill realisation period to be extended by six months.
AEPC has also sought a minimum 25 per cent increase in working capital limits, without any additional collateral, and wants no penalty on forward covers.
"Unless the government immediately announces an economic package with specific focus on the apparel export sector, given the fact that industry's products are ‘perishable’, our industry ... will die a slow death," Sakthivel said in his letter.
He said overseas buyers and buying houses are either cancelling or postponing confirmed export orders and are also holding back or indefinitely deferring payment for goods already shipped or ready-to-ship, besides asking for hefty discounts.
The cancellations and postponements of shipments have eroded packing credits and impacted exporters' fund-liquidity position, which is in a precarious condition, as cash flows have completely stopped, he said.
About 70 per cent of apparel units in the country are micro, small and medium enterprises (MSMEs).
"Labour forms the single largest component of product costs in the industry, with wages amounting to 25-30 per cent of the cost of production. Further, units operate at thin margins of 3-4 per cent, and are completely dependent on export benefits granted by the government," a news agency quoted Sakthivel as saying.
"Wages may be made out of the ESI [Employees’ State Insurance] funds we have been paying regularly over the years. The Atal Bimit Vyakthi Kalyan Yojana (ABVKY) Scheme of the Government is understood to have huge reserves of about ₹91,000 crore from contributions made by employees and employers. The same may kindly be utilised along-with reserve funds for payment of wages," he added.
AEPC has urged the Government to pay for the employer’s portion of Employees’ Profident Fund from March to June, irrespective of the number of workers employed. It also urged the government to contribute towards salaries of employees for six weeks, or till normalcy resumes. It also wants the packing credit period for existing loans and export bill realisation period to be extended by six months.
AEPC has also sought a minimum 25 per cent increase in working capital limits, without any additional collateral, and wants no penalty on forward covers.
Fibre2Fashion News Desk (DS)
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