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The consistent fall in the rupee against the dollar has aided the textiles sector but the volatility in the exchange rate isn’t allowing the segment to reap the full benefits of the currency’s fall.
Experts say a gradual fall is acceptable to buyers and is absorbed in the international market. But the rupee’s collapse and better realisations of Indian exporters aren’t appreciated by foreign buyers, which are trying to renegotiate contracts. “We have been asked to reduce prices, as our buyers are aware of the sharp fall in the rupee but the problem that would arise later is when the rupee appreciates, it would be difficult to raise prices, as it is a very competitive market,” said Mitesh Shah, vice-president (finance), Mandhana Industries, a garment exporter.
The textile industry is in a a Catch-22 situation — a renegotiation of contracts on the terms of buyers would result in huge losses once the rupee starts to appreciate. Two months ago, garment manufacturers had reduced prices 10-15 per cent. Now, they are being pressed to cut prices further. S P Oswal, chairman of Vardhman Group, says it might give a rosy picture, as the sliding rupee could fetch higher realisations, but the uncertainty in the market offsets all the gains in the short run.
Also, cotton prices have gone through the roof. Earlier, textile makers imported cotton, but the depreciation in the rupee has made it unviable to do so. Prices of the Shankar variety are at Rs 48,000 a candy.
Hardyal Singh Cheema, managing director of Cheema Spintex, said exporters hedged for 50-60 per cent of their consignments; most exporters hedged at Rs 62/dollar. Now, the dollar was breaching the 68-mark, but full benefits wouldn’t be available to them, he added.
Rahul Mehta, president, The Clothing Manufacturers’ Association, said on the face of it, exporters were likely to gain but much depended on input costs. “If we are able to put input costs under control and ensure the availability of raw material, exporters can earn premium. But the uncertainty looming large in different sectors of the economy is making all sorts of predictions meaningless.”
Experts say a gradual fall is acceptable to buyers and is absorbed in the international market. But the rupee’s collapse and better realisations of Indian exporters aren’t appreciated by foreign buyers, which are trying to renegotiate contracts. “We have been asked to reduce prices, as our buyers are aware of the sharp fall in the rupee but the problem that would arise later is when the rupee appreciates, it would be difficult to raise prices, as it is a very competitive market,” said Mitesh Shah, vice-president (finance), Mandhana Industries, a garment exporter.
The textile industry is in a a Catch-22 situation — a renegotiation of contracts on the terms of buyers would result in huge losses once the rupee starts to appreciate. Two months ago, garment manufacturers had reduced prices 10-15 per cent. Now, they are being pressed to cut prices further. S P Oswal, chairman of Vardhman Group, says it might give a rosy picture, as the sliding rupee could fetch higher realisations, but the uncertainty in the market offsets all the gains in the short run.
Also, cotton prices have gone through the roof. Earlier, textile makers imported cotton, but the depreciation in the rupee has made it unviable to do so. Prices of the Shankar variety are at Rs 48,000 a candy.
Hardyal Singh Cheema, managing director of Cheema Spintex, said exporters hedged for 50-60 per cent of their consignments; most exporters hedged at Rs 62/dollar. Now, the dollar was breaching the 68-mark, but full benefits wouldn’t be available to them, he added.
Rahul Mehta, president, The Clothing Manufacturers’ Association, said on the face of it, exporters were likely to gain but much depended on input costs. “If we are able to put input costs under control and ensure the availability of raw material, exporters can earn premium. But the uncertainty looming large in different sectors of the economy is making all sorts of predictions meaningless.”
