Exports from the knitwear city of Tirupur continued to show a negative growth, and the industry representatives say that their vision to become a Rs 25,000-crore industry by 2012 is ‘impossible’. The industry has also decided to hold back investments worth Rs 1,500 crore.
The target was set based on the 15-20 per cent growth that the industry had witnessed till 2007-08. However, exports started declining by about 13 per cent since then.
According to A Sakthivel, president, Tirupur Exporters Association (TEA), exports declined to Rs 9,500 crore in 2008-09 from Rs 9,950 crore in 2007-08 and Rs 11,000 crore in 2006-07.
“It is not because of the decline in demand from the overseas markets but the garment exports from the China and Bangladesh that increased 20-22 per cent. The decline was attributed to appreciation of the rupee against the US dollar, power cuts and lack of government support in terms of incentives,” he said.
Sakthivel said exporters were incurring losses to the tune of around Rs 2 crore a day owing to this. Around 65 per cent of the exports from Tirupur are transacted in US dollars.
For instance, the Chinese government has increased the value-added tax (VAT) refund to 17 per cent from nine per cent, while Bangladesh offers a 15 per cent subsidy for garment exporters. Besides, the exporters get various incentives from the Bangladesh government including tax support, infrastructure and power. “All these make their products cheaper and ours costly,” Sakthivel said.
Exporters in Tirupur are still awaiting a VAT refund to the tune of Rs 250 crore from the government since the last nine months.
T Thirukumaran, managing director, Estee Exports, said customers were asking for a 15-20 per cent price reduction, as compared to last year, as prices of raw material, labour and other input costs are increasing by the day. Wages rose by three per cent since January 2009, raw material prices increased 15-20 per cent in the last three months and input costs like energy rose 15 per cent.
Together, the expenditure increased 25 per cent, Thirukumaran said. “If we don’t cut down the prices, then he (customer) will go to China, Bangladesh or Vietnam.”
Exporters are incurring their additional expenditure by borrowing additional loans from banks and financial institutions. According to industry estimates, around Rs 6,000 crore worth of loans has to be repaid by the Tirupur industry alone.
The Tirupur industry, which predominantly caters to the US and European markets, is now looking at markets like Japan, New Zealand and other South American countries. “South African market offers huge potential but banks are not coming forward to give bank guarantees,” Sakthivel said.
