Open Houses with DGFT
at Tirupur, Chennai
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Mr. A Sakthivel, Vice President, FIEO addressing the Meet. On the dais, are, from left, Mr. G Karthikeyan, Mr. M Saikumar, Dr. Shyam Agarwal, Mr. R.S. Gujral, Mr. C Rajendran, Mr. Ajay Sahai, and Mr. G Sreeharsha. |
Rising rupee has begun claiming their victims in the textile town of Tirupur. A large number of workers are losing jobs as exporters find it difficult to keep the mills running. The export from the town in the first half of this financial year dipped considerably, and with no new orders coming even now, some textiles mills in the city have already started laying off workers and doing away with night shifts. FIEO Vice President Mr. A. Sakthivel made these startling revelations at an Open House with DGFT on 10th October in Tirupur. The Open House was organized by the Southern Region office of FIEO in alliance with Tirupur Exporters’ Association.
"Around 7,000 employees have been rendered jobless and in next couple of weeks about 15,000 more workers are about to join the list of losers," screamed Mr. Sakthivel. He said by the time the skimpy relief provided by the government reaches exporters, the rupee appreciates further and the net relief turns ineffective. He referred to the upward revision in drawback rates notified in July and said it was too inadequate to compensate the exporters against appreciation.
Mr. Sakthivel suggested that the government should take some additional measures urgently. He called for lowering the interest rate on the pre-shipment and post-shipment credit to 6%; waiving Fringe Benefit Tax for exporters; fixing the exchange rate for exporters at 41 rupee a dollar, completely exempting all services used by exporters from taxes. The service tax benefits announced by the government last week for transporting goods to the port as well as on port handling charges is just not enough, he added.
Tirupur, the so called Mecca of Hosiery Goods in South, has around 2,500 textile knitting units, 1,500 garment manufacturing units, 700 dyeing units, 400 embroidery units and many printing units. According to the trade analysts, the knitwear industry in Tirupur, which had an export turnover of Rs. 11,000 crore during FY 2006-07, is set to see a 6-7% decline in volume of business this year.
While addressing the gathering Mr. R. S. Gujral, Director General of Foreign Trade highlighted the role of his Department as a facilitator. He sympathized with the problems of the exporters in the wake of appreciation of Indian Rupee but also advised them to start living with such appreciation which is inbuilt in a fast developing economy like India. He assured that he will continue to initiate measure to reduce transaction time and cost for the exporters to restore their competitiveness. He further informed that Government has already covered seven services for remission of service tax and he is hopeful that more services including service tax on commission to foreign agents, overseas travel, courier charges, payment to CHAs and other professionals would be covered for the service tax remission.
Dr. Shyam Agarwal, Addl. Director General of Foreign Trade, Mr. Saikumar, Zonal Jt. Director General of Foreign Trade, Mr. Tapan Majumdar, Jt. Director General of Foreign Trade, Policy Division, Mr. Seetharam Reddy, Jt. Director General of Foreign Trade, Mr. Sasikumar, Jt. Director General of Foreign Trade, Mr. C. Rajendran, Commissioner of Customs, Coimbatore, Mr. Sriharsha, Addl. Commissioner of Customs, Mr. G. Karthikeyan, General Secretary, Tirupur Exporters Association (TEA) were present in the open house which was joined by more than 100 exporters.
Past President of FIEO and now the Chairman of Tamil Nadu State Council - FICCI, Mr. M. Rafeeque Ahmed raised his doubts over achieving the $160 billion export target set for the current fiscal with rupee going down by more than 11 percent in the past one year. He said the impact of the appreciation is worse on the leather and leather products sector that has witnessed an erosion of 8.8% in its net profits margin in the last six months and is feared to face a further erosion of 13.7% in the next six months. He further said the erosion is higher in net profit margin than in operating income due to the impact of rising interest rates, which reduces the net profit margin by another 2%.
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Moreover, says Mr. Ahmed, Indian leather sector also faces import threat from China, Bangladesh and Pakistan in the domestic markets. He warned that if corrective measures were not taken urgently, then there could be large scale credit defaults leading closure of the units. Commenting on the above observations, Director General of Foreign Trade Mr. R.S. Gujral advised the exporters to adopt hedging, cut down production cost and explore niche products to tackle |
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Mr. R.S. Gujral, addressing the Open House at Chennai. On the dais from left are, Mr. Tapan Majumdar, Mr. G Seetharam Reddy, Mr. M Saikumar, Dr. Shyam Agarwal, Mr. A.Sakthivel, Mr. Rafeeque Ahmed, and Mr. Ajay Sahai. |
the strong rupee. He stressed that the exporters should learn to adjust to the fast changing international trade.
Mr. Gujral suggested FIEO to set up a nodal cell to study the countervailing and anti-dumping measures of competing countries and the subsidies offered by them to their exporters. He said, "Such studies would help the government take some out of box measures in the next two months prior to the announcement of the Union Budget." On his part, he said, the Finance Ministry has been urged to exempt exporters from service tax under 15 categories and we expect some positive results in the next few weeks.
On switching to a dual exchange rate mechanism demanded by exporters, Mr. Gujral pointed out that it was a retrograde step and what was required was a full convertibility of the rupee.
FIEO Director General Mr. Ajay Sahai, while summing up the meet, said the two packages announced by the government in July & October were inadequate and hardly met the aspirations of the exporters. Moreover, said he, whatever little relief came, has been wiped out on account of further appreciation of currency during April-July quarter.
Mr. Sahai endorsed the view of Mr Gujral that exporters should resort to hedging, factoring or booking forwards as short term measures and focus quality upgradation and moving up the value change as long term measures to counter any further appreciation of rupee. Though this is a difficult task, said he, nevertheless, it is the need of the hour.
At Chennai, a similar Open House was organized by FIEO on 11th October. The event was sponsored by Citi Bank. More than 120 exporters joined the Open House. The eminent dignitaries who interacted with the exporters were Mr. R.S. Gujral, Director General of Foreign Trade, Dr. Shyam Agarwal, Addl. Director General of Foreign Trade, Mr. A. Sakthivel, Vice President & Chairman, FIEO Southern Region, Mr. M. Rafeeque Ahmed, Past President, FIEO & Chairman, Tamilnadu State Council, FICCI, and President, Tirupur Exporters’ Association, Mr. Ajay Sahai, Director General, FIEO, Mr. Saikumar, Zonal Jt. Director General of Foreign Trade, Mr. Tapan Majumdar, Jt. Director General of Foreign Trade, Policy Division, Mr. Seethamaram Reddy, Jt. Director General of Foreign Trade, Mr. M. Dhanasekaran, Addl. Commissioner, Customs, Jt. DGFTs of Southern Zone of DGFT.
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Mr. A Sakthivel addressing the gathering at Chennai Open House. |
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