The news about impact of Covid 19 just seems to not stop. The latest figures being shared by Aepc and several other members of export community gives a horrific tale of garment sector. With overseas buyers and buying houses either cancelling or postponing confirmed export orders, about 65% of apparel exporters payment amounting to at least $2 billion (about Rs 15,300 crore) is currently stuck with foreign buyers.
“With lockdowns across markets, foreign buyers are postponing orders, and asking for hefty discounts. Goods in transit goods are also not moving. Those already dispatched are also finding no takers on various foreign ports,” says Sakthivel. He adds that that unless the government comes out with a special export centric package, a big question mark now looms large on the fate of the sector.”
“HKL Magu, Managing Director of Jyoti Apparels opines that most of the exporters’ bank deposits today stand exhausted.
Had they received the payment from overseas buyers, the same would have been used to pay for inputs such as fabrics and raw materials and, more importantly, to service their banks’ obligations. An uninterrupted cash flow cycle would have facilitated businesses to look for more funding from institutions to help sustain their operations,”.
He also mentioned that most of the raw material is lying in factories and it is feared how will it be utilised as currently there are no orders and moreover by the time orders will pour the fabrics bought will be of no use. He further added, ” We are in a big dilemma as so what would happen in future. Labour has already moved to their homes, machines are not running, orders are being cancelled and shipments are on hold. How are we going to pay to our workers is a big question.
Exporters feel that the Ministry should step in and take some immediate steps for the exporters as well. Like ESI should be funded by the government till the time situation does not settle down. Also there are talks regarding some bonus act being implemented which allows workers for additional incentives. Industry feels it should be put on hold as this would exert too much pressure on garment exporters already reeling under so much pressure.
Calling the present situation “very grave with no light at the end of the tunnel”, he flags that payments expected against goods shipped in December, with a payment due date in March, has not come. To add to their woes, all future orders have now been indefinitely deferred.
While many well known retail chains like H&M and Primark have come to rescue of exporters by finding them many foreign buyers and buying houses are not lifting deliveries, despite them having reached their ports.
Such cancellations and postponement of shipments have resulted in packing credits being eroded, adds AEPC’s Sakhtivel, further underlining that apparel products are tailor made, design specific, and fashion specific and thus are ‘perishable’, and any cancellation would “make them redundant, with little or no salvage value next year”.
The widespread cancellation is not just a global phenomenon, but domestically too manufacturers are increasingly being advised to not ‘cut, stitch, sew any fresh item’.
Amid a slowing economy, the Indian apparel sector was already reeling under a liquidity crunch, besides many traditional bottlenecks. Firstly demonetisation, and then GST, despite all its flaws because these were India-based events, but the impact of Covid-19 is unprecedented. “
The Indian apparel sector, the world’s fourth largest producer of textile and garments, is not just a foreign exchange earner, but an employment oriented industry, employing 12.9 million people. Industry experts are of the view that given the widespread interdependence of many sub-industries on the sector, any resultant job losses will have a domino effect across numerous ancillary industries, jeopardising their very survival.
“The ripples of any degrowth in this sector will likely affect millions of bread owners across the length and breadth of the country,” cautions Sakthivel.
The latest that is being heard is that the Ministry of Textiles has formed a special committee for revival of sector
Union Textiles Minister Smriti Irani constituted four committees to come up with suggestions on how the textile and clothing industry could be revived post the COVID-19 crisis. The committees, with representation from the industry and the Ministry, will come out with suggestions in a week.
A textile association head, who participated in the video call with the Minister, said the committees would explore how industries could re-start production in a phased manner, the financial needs of the sector, promoting Indian brands, and how exporters could tap the potential in the global market once the crisis is over. The committees, with members from the industry and the Ministry, will come out with suggestions in a week and discuss it.
