Rise in prices of raw materials hits Noida’s garment sector
Lalit Thukral, president of the Noida Apparel Export Cluster, said the pandemic made the situation worse for the ready-made sector. Garment production, both for domestic market and export, was halted for four months between March and June 2020.
Rising prices of raw materials and packaging items have hit the garment industry in Noida. Exports dipped from ₹20,000 crore in 2019-20 to ₹15,000 crore in 2020-21 and 20% of people employed in the sector have lost their jobs.
Lalit Thukral, president of the Noida Apparel Export Cluster (NAEC), said the pandemic made the situation worse for the ready-made sector. Garment production, both for domestic market and export, was halted for four months between March and June 2020.
“When the situation improved to some extent, the garment sector in Noida didn’t make enough business like it did before the pre-Covid era. As a result, during the 2020-21 fiscal, apparel exports suffered a loss of more than 25% as compared to the export figures in the previous financial year,” he said.
He further said the steep rise in the price of yarn and cotton, which are part of most apparels, has made things worse. “Yarn’s price per kg increased by more than 22% for 30s combed (combed cotton is a softer version of regular cotton and more expensive), 21.3% for 34s combed and 21.9% for 40s combed during the second half of 2020-21 fiscal. Exporters enter into a price agreement with buyers at least six months before supply. Now, while the mills are increasing the prices frequently and arbitrarily, the buyers or importers are not willing to increase the prices. Besides, duty concession to competitive countries like Bangladesh, Vietnam, etc. because of their Free Trade Agreement (FTA) with importing countries make the situation precarious for the Indian exporters, mainly from Noida,” he said.
Thukral also said that the government has recently introduced Refund of Duties and Taxes in Export Products (RoDTEP) from January 1 this year in place of the erstwhile Refund of State and Centre Taxes and Levies (RoSCTL). “The main objective of RoDTEP is to promote the labour-intensive industry and provide a level playing field to exporters, who have been at a disadvantage on account of the FTAs enjoyed by our competitors like Bangladesh, Sri Lanka, Pakistan and Vietnam. But since RoDTEP, which has reduced the refunds available for traders, does not apply to the apparel sector, our exporters are unable to competitively quote the rates to importing countries. We have requested the government to factor the RoSCTL rates in RoDTEP and release it on priority basis to provide a level-playing field to the exporters,” he said.
Manoj Sahu, another exporter, said the major reason for the increase in yarn and cotton prices is due to the massive surge in the export of the raw materials. “The rise in the price of raw material has forced garment exporters to shut down their companies, resulting in large-scale unemployment and subsequently India losing export to other countries. The government should immediately call a meeting of the stakeholders associated with cotton production and apparel exports to resolve this issue and stabilize the raw material prices,” he said.
He further said that the withdrawal of duty free import of trimmings and embellishments on February 1 this year has also adversely affected the apparel export business in Noida. “The scheme was a lifeline for exporters as it allowed them to import trimmings and embellishments up to 5% of export duty. We have requested the central government to not only restore but also allow duty-free import with a one-time bond facility for clearing the courier shipments as clearance of these items under a bond for each small import is very cumbersome, and causes delay and adds to the cost,” he said.
Meanwhile, concerned about the possibility of a lockdown due to a surge in Covid-19 cases, the Apparel Export Promotion Council (AEPC) has urged the government to exempt factories from lockdown and requested an ‘essential service’ tag for the labour-intensive apparel export industry.
A Sakhtivel, the AEPC chairman, said that to ensure uninterrupted manufacturing at factories, the council has written letters to the union ministers of health, home, textiles and commerce and industry, besides the chief ministers of some states.
“The industry supports over 13 million workers directly and many more indirectly in rural and backward areas and largely comprises micro, small and medium enterprises. It will be severely impacted if the lockdown is imposed again,” said Sakhtivel.
Requesting the government to exempt the apparel export industry from a lockdown and consider it as an essential service sector, the AEPC chairman also said that such lockdowns create widespread disruption and not only have short-term impacts but also affect the health of the industry in the long-term.