Can't miss peak April-June season due to coronavirus: Exporters to Centre

Industry bodies have unanimously cautioned against extending the lockdown owing to coronavirus, arguing that without adequate relief, exports will exponentially accumulate losses and cede market share to others.

National-level exporters’ bodies representing engineering goods, apparel, and electronics, among others, have written to the commerce department over the past two days.

They stressed manufacturing units needed to be quickly reopened so that the crucial April-June export season could be taken advantage of, sources said. “At a time when China is restarting factories and is eager to clear excess inventories, Indian exports need to be able to fulfil foreign orders that haven’t yet been cancelled or postponed,” said a senior functionary of the Confederation of Indian Industry (CII).

The industry body has supported creating and maintaining quarantined zones in key industrial areas and special economic zones to keep manufacturing going. “This is the peak time for global trade and whereas domestic markets do have some protection, the world markets are open for domination by other countries. India cannot lose out on that,” said Engineering Export Promotion Council (EEPC) India Chairman Ravi Sehgal.

Engineering products account for 25 per cent of India’s merchandise exports. Of the top 25 markets, accounting for over 75 per cent of Indian engineering exports, most of the major destinations are in a state of lockdown or stringent restrictions, the EEPC India has pointed out.

These include the top three destinations — the US, the UAE, and Germany — apart from the UK, Bangladesh, Mexico, and Singapore, the body said. “March shipments have all been disrupted. Buyers overseas can be convinced and held back for a month or so but not beyond that. In case India is out of production for the world market this month, it will be out of the overseas buyer’s plans for the whole of 2020,” Sehgal added. “We expect contraction in March. With major economies continuing to see sharp rise in corona cases, the cumulative fall in demand would spill over into April, causing a bigger contraction,” said Ajay Sahai, director general of the Federation of Indian Export Organisations (FIEO).

According to the FIEO, more than 30 per cent of the export orders are stuck.

Few financing options

According to ratings agency ICRA, apparel exports are witnessing significant turbulence and vast shipments set to hit European and US markets for the ongoing Spring-Summer Season 2020 are likely to suffer a major setback. Overall, the industry is facing a major liquidity squeeze with few financing options left and dues from buyers accumulating. To reduce the cost of imports, Confederation of Indian Textiles Industry Chairman T Rajkumar has suggested all raw materials, dyes and chemicals, intermediaries, spares, and accessories be exempted from anti-dumping duty and basic customs duty.

In a letter to Prime Minister Narendra Modi, Apparel Export Promotion Council (AEPC) Chairman A Sakthivel said the industry, employing 12.9 million, would face a disaster if the government immediately did not announce a targeted economic package.

“Apparel exports are a seasonal industry and the products are similar to perishable commodities because they are tailor-made, design-specific, fashion-specific exports and any cancellation this year may have little or no salvage value next year,” he added. According to industry estimates, about 70 per cent of the apparel units are in the micro, small, and medium sector. Labour costs form the single-largest component of the product cost at a typical 25-30 per cent, against the norm of 7-8 per cent for overall domestic industry.

Orders cancelled

The Electronic Industries Association of India has also said India’s hard-fought competency in global trade would be at stake if exports are not able to leave factory gates. “With the help of comprehensive government support, hardware and component manufacturing had slowly gone up over the past three years. It is no secret that Chinese suppliers are waiting to cut Indian players out as soon as they get the chance to do so,” said a senior functionary. It has been reported that relatively small sectors that are battling volatility have also not been spared cancellation. These include carpet exports, worth Rs 2,000 crore, being stuck and leather exports, worth Rs 7,600 crore, that have been cancelled. Over 15 per cent of the orders have been held over while almost 55 per cent have been cancelled in the previous two months, said K R Vijayan, chairman, Indian Finished Leather Manufacturers and Exporters Association.

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