ECGC, a lifeline for exporters

JAIPUR: As recession looms large over the globe, industry catering to exports in Rajasthan suffers a slowdown. If exports have dropped by almost
25%, the order books are running dry for the second quarter.

But more than that, exporters are finding it tough to recover their payments for shipments sent about six months back.

"We have received about 46 claims for shipments affected to overseas buyers from Rajasthan exporters and have cleared 33 payments so far," said Saurabh Srivastava, assistant manager, business development, Export Credit Guarantee Corporation of India Ltd (ECGC). It is a company wholly-owned by the government of India and controlled by the ministry of commerce.

In a first of its kind rescue scenario, recently the ECGC paid a whooping Rs 53.83 crore, the highest claim in the history of ECGC to a textile exporter in Jaipur.

"This was against payments for a shipment worth Rs 65 crore that was sent to a company in Atlanta, US that went bankrupt. We had been dealing with this company for the last 20 years. Earlier, the company had been asking for an extension, but they simply couldn't pay up. We don't blame them entirely. The economy is such but what came in handy was the timely support from ECGC," said Mahesh Tikku from Devgiri Exports, Jaipur.

With their bulk payment stuck up, the company in a financial crunch had to resort to a loan from a PSU bank to continue running their establishment and taking care of overheads. But now with a substantial amount paid up to them against a miniscule premium paid to ECGC, they can think of running the establishment and continue production albeit at a slower pace, owing to global slowdown.

"We have 330 exporters from Jaipur and about 250 from Jodhpur listed with us as payments for exports are open to risks even at the best of times and in the prevailing scenario the risks have assumed large proportions today. Export credit insurance protects exporters from the consequences of the payment risks that are becoming rather rampant today," said Srivastava.

Rajasthan today has over 636 medium and large scale industries and about 2,51,493 small scale industries providing employment to lakhs of people. At the moment there are about 2,500-3,000 small, medium and large units in Jodhpur alone that export wooden furniture. And closer home, 800 units in Jaipur, 200 among these into large scale production of handicrafts. While the overall revenue generated by handicrafts exported from India amount to Rs 10,000 crore, just wooden furniture from Rajasthan generates over Rs 2,000 crore annually.

According to Dileep Baid, president, Federation of Rajasthan Handicraft Exporters (FORHEX), "In the last six to eight months, there has been a drop of about 25% in export orders. Buyers have instructed to hold on to orders till further confirmation. Besides, the order books are drying up now for lack of fresh orders."

Sitapura Industrial Area in Jaipur is going through a similar situation. "Last financial year, we generated a turnover of Rs 800 crore. But 2008-09, we haven't even touched Rs 300 crore. Largely, the garment industry exporting to Australia, US and Japan has received a severe blow. We would estimate the overall drop to about 40%," said S N Kabra, president, Sitapura Industrial Area.

As a spin off, about 30% work force had been rendered jobless in the 150 garment units as they have cut down operations from 24 hours to just 8 hours.

"We have to play smarter. It's time for a complete overhaul in business, time to upgrade our technology, use latest economically conducive, labour efficient devices and get optimum results out of minimum investments," said R K Malpani, a textile exporter, who also has a claim of Rs 25.85 lakh credited into his account through ECGC against a shipment affected to a buyer in the US.

Bhilwara, a large textile townships recognised as a town of export excellence for textiles and diamonds that generates a turnover of Rs 5,000 crore is also experiencing a decline of about 20-30%. "Recession and the dollar escalating are making our buyers demand products at a lower cost. The drop is likely to carry on to the next financial year too," said Prem Garg, secretary, Bhilwara Textile Trade Federation.

As for the incentives and package announced by GOI for leather and textile exports of Rs 325 crore that will start from April 1, 2009 and export incentives for technical textiles, stapling machine, handmade carpets and dried vegetables, experts feels will not make much difference to the prevailing scenario.

Source: http://timesofindia.indiatimes.com/