The Hindu : Business : Textile exporters seek relief to counter rupee rise

Online edition of India's National Newspaper
Wednesday, Jun 13, 2007
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Textile exporters seek relief to counter rupee rise

M. Soundariya Preetha

Some units have put on hold expansion plans

COIMBATORE: Textile exporters who have been hit by the rupee appreciation have appealed to the Centre for reimbursement of State and local level duties, which are not currently reimbursed.

"Almost for the last two decades, I have not seen this steep appreciation of the rupee in such a short duration," says a yarn exporter here.

The momentum of appreciation gained after March 20 and it was so sudden, adds M. Senthil Kumar, Chairman and Managing Director of the Palladam Hi-Tech Weaving Park.

As a result, those executing the pending orders are finding it difficult to negotiate higher price with their buyers. "Fresh contracts are not getting finalised," adds Mr. Senthil Kumar. Yarn stocks are piling up with the mills (According to the Southern India Mills' Association (SIMA), stocks in the mills during January-April this year were 24 per cent more than in September-December, 2006) and some textile units have even put on hold their expansion plans.

According to the Cotton Textile Export Promotion Council, it is estimated that for every one-percentage point of rupee appreciation, the profitability of the textile units is hit by 1.2 per cent. Textile units work on an average profit margin of 5-6 per cent. Over a period of one year (June 2006-June 2007), the rupee has appreciated by 11.94 per cent against the dollar. However, the appreciation of the Chinese yuan and the Indonesian rupiah is less than six per cent and the currencies of Sri Lanka, Pakistan and Taiwan have depreciated.

For textile exports, cost competitiveness is significant. Foreign buyers have the option of going to manufacturers in competing countries such as Pakistan, China or Bangladesh if costs go up here, says S. V. Arumugam, Chairman of SIMA. "Indian textile industry will lose its competitiveness." A study conducted by the Confederation of Indian Textile Industry says that the stagnation in textile exports because of the steep appreciation of the rupee will lead to loss of lakhs of potential jobs in 2007-08.

The SIMA has said that the exporters incurred several un-rebated taxes such as electricity tax. The textile industry has appealed to the Centre to provide a relief of at least six per cent of the f.o.b (free-on-board) value immediately to the textile exporters.

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