The Apparel Export Promotion Council (AEPC) today said the Government must probe the reasons for the steep rise of more than 50 per cent in the prices of fabrics in the past two months.
The council said the hike in prices had forced many garment exporters to cut production or honour contracted quantities at a loss.
"Besides price fluctuations, fabric availability has become a serious issue," said AEPC chairman Rakesh Vaid at a press conference here. "Weaving units are not making any delivery commitments."
Mr Vaid said the fibre and yarn price hikes were being passed on to garment manufacturers. But overseas buyers are not able to absorb this hike due to their fixed selling price. Giving a cost sheet of a ladies' top made of cotton voile, he said the cost escalation is to the tune of 24 per cent -- from Rs 164 a piece in July to Rs 199 now.
Mr Vaid said cotton voile 92 x 80 that was trading at Rs 20 per metre in July is up 55 per cent at Rs 31 per metre now. The price of cotton voile 82 x 72 is up 57 per cent from Rs 18.50 per metre to Rs 29. Similarly, price of 60's cambric 92 x 104 is up 50 per cent from Rs 24 to Rs 30 now.
He said that in April, 2 x 60s yarn was costing Rs 740 per bundle which has now increased to Rs 1,030 per bundle. "The rates change on daily basis unlike monthly price fixation earlier," he said.
According to him, the global economic recession has resulted in dropping retail sales in all importing countries. The fresh financial crisis in Middle East has also led to doubts over an imminent recovery. As a result, Indian apparel industry is running in losses or operating at profit margins of one to two per cent, he said.
Mr Vaid said that by January next year there could be massive job losses in the apparel manufacturing sector.
He said that, in the first half of 2009-10, garment exports out of India tumbled 7.32 per cent compared to last year. In October 2009, the country's apparel exports were hit severely and declined by 17.62 per cent to $ 603 million.
Indian apparel exports to the United States – the world’s largest market – declined by 6.46 per cent to $ 2.27 billion during January to September this year compared to $ 3.07 billion dollars in the previous year.
But China’s exports gained by 1.95 per cent to $ 17.23 billion and Bangladesh’s were up 2.35 per cent to $ 2.66 billion.
"The government must introduce fiscal relief measures to save garment exports out of India," said Mr Vaid. "Stimulus packages and other steps announced so far have had negligible impact on the Indian apparel industry. They were either release of withheld benefits or restoring benefits withdrawn earlier."
The AEPC chairman demanded duty drawback rates of 13.25 per cent to mitigate the increasing cost disadvantage, extension of two per cent duty-free scrips for exports to the US and the European Union under the Market Linked Focus Product Scheme, abolishing countervailing duty on textile machinery, extension of service tax exemption for all export-related services and provision of upfront service tax exemption instead of refund route.
The council represents about 8,000 small, medium and large garment exporters. India exported clothes worth $ 11 billion last year and is the world’s fifth largest exporting nation.
Source : Netindian.in