Business Ideas'Apparel sector may see massive job losses by Jan 2010'
Rising cotton prices have robbed the domestic garment exporters off their competitive edge in the global markets which could lead to massive job losses, Apparel Export Promotion Council (APEC) said today.
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"By January 2010 there could be massive job losses on unprecedented scale which could lead to social problems in apparel manufacturing clusters across the country," AEPC Chairman Rakesh Vaid said.
The premium quality of cotton which was trading at Rs 20 per metre in July 2009 has increased by up to 55 per cent at Rs 31 per metre now. This has forced many garment exporters to cut production or cancel their orders, AEPC said.
Vaid said Indian exporters are losing their share to competitors like Vietnam, China and Bangladesh as these enjoy more incentives and are price competitive.
Further, it said, there is a need to focus more on value added exports rather than outward shipment of raw cotton due to rising fabric prices in India.
Besides the effect of global economic crisis on the sector, the Middle East debt problem has also led to doubts over an imminent recovery. As a result the industry is running into losses or operating at profit margins of 1 or 2 per cent, the council said.
Vaid said, "We are not against cotton exports but there should be a conducive environment for exporters."
Apparel exports registered the maximum fall in October 2009 with the exports registering a decline of 17.6 per cent at $603 million.
"The government must introduce fiscal relief measures to save garment exports out of India. If the government will not come out with a corrective package, we are looking at major collateral damage," he added.
The government had last week said it has no plans to ban exports of cotton as surplus stocks need to be offloaded overseas.
"Our domestic consumption is 240 lakh bales (one bale is equal to 170 kg), we have 305 lakh bales. There is surplus (and therefore) we have to export," Maran said.
Besides, the apparel exporters also sought raising of duty to 13.5 per cent from the current 8 per cent.