Exporters Exit

  • Abhishek Behl
  • India
  • Oct 26, 2012



Exporters in Gurgaon, particularly those dealing in garments, are less worried about the tough economic conditions and uncertainty in the US and EU markets, that is threatening to undermine their entire business; they are more concerned about the indifferent attitude of the state government and the administration towards industry as a whole. Exporters say that instead of helping them, and facilitating the industry, that employs thousands of workers in the Millennium City, the bureaucratic set up is creating impediments in their smooth working.

The insistence of the bureaucracy to control and micro-manage everything, including infrastructure, is not something that would help the industry, particularly exports, say industry watchers. Currently Gurgaon has around 300 small and medium garment export units, that are battling higher interest rates and a lack of demand from buyers abroad. They however find local red-tape to be the toughest challenge confronting them.

Chand K. Anand, President of All India Garment Exporters Common Cause Guild, says that a large number of exporters in Udyog Vihar have closed shop, because they can not fulfill the regulatory demands of HSIIDC. He had recently led a delegation to the Chief Minister, but says no one in the government is ready to listen.

“The exporters are working in a competitive environment, and have to fight with China, Bangladesh and other countries to gain market share. But when they do not have a peace of mind to run their factories, how can exporters grow here,” asserts Anand. The primary demand of the Gurgaon based exporters, and other industrialists, has been to extend the FAR upto 250 per cent, and this should not be linked with ‘One time Amnesty Scheme’, with over-riders for availing the benefit within a time frame,
says Anand.

The poor infrastructure in the City, lack of water supply for industrial and drinking purposes, scarce parking, and too many traffic bottlenecks further make it difficult to operate in Gurgaon. Anand says that if the entrepreneurs install power generators they are accused of zoning violations by the authorities, which is something beyond comprehension!Exporters suggest that the power infrastructure in Gurgaon has to be improved, to provide adequate, regular and uninterrupted supply at reasonable rates to industry. In view of the acute power shortage, government should encourage captive power generation, by providing diesel at international prices, and exempt it from excise duty and local taxes, they add.

While exporters in Udyog Vihar are more worried over FAR and other changes in the Estate Management Rules of the HSIIDC, the entrepreneurs in Manesar say they are being hassled by the government to pay enhancements to the tune of lakhs. “When a businessman has bought a plot for Rs. 10 lakhs, why should be made to pay double the amount as enhancement, to further compensate farmers?”, asks Amina Shervani, President of the Manesar Industrial Welfare Association. She further says that a number of exporters in Manesar want to change their line of business, as it is becoming increasingly difficult to manage things in the present scenario.

The despondency among the entrepreneurs, particularly the exporters, is such that they do not want to discuss the situation that is prevailing in Gurgaon. M.K Jain, an exporter, asserts that nothing is going to change in Gurgaon, whatever may be written in newspapers, as the government is not committed to help the industry. “There is rampant corruption. The export houses are facing tough conditions, both at home and abroad, and as a result many have closed down in Gurgaon,” says Jain.

Colonel Anil Chawla, an exporter of leather products based in Manesar, further says that the government should not interfere in their working, and rather let them ply their trade. “Don’t disturb people, let them work. A majority of exporters in Gurgaon and Manesar are small and medium houses, that do not have the time and resources to fight both the government, as well as competitors abroad,” asserts Chawla. Many schemes that were launched in Haryana, to help exporters, have remained on paper, he informs.

It is not as if only the small exporters are suffering. The declining trend in the growth rate of garment exports, which started in  2008-09 has continued, and further worsened during 2012-2013.

The global economic slowdown, and uncertainty in both US and European markets, is going to cast a dark shadow on India’s export sector, that has not been able to shake off the after effects of the 2008 recession, says Surinder Anand, General Secretary of the Garment Exporters Association.

“Apart from this, there have been a number of indigenous factors, particularly high transaction costs, increasing input costs, high inflation rate, tight credit policy, higher interest rate, rigid and outdated labour laws, poor infrastructure, high power cost and frequent power cuts, increasing cost of wages and steep hikes in fabric and yarn prices-all adversely affecting the competitive strength of the Indian Apparel Industry,” says Anand, who is an industry veteran.

Labour issues in particular, are affecting the export sector in Gurgaon, says Shervani. The skewed policies of the government help neither the labour nor the entrepreneur – only the middlemen. “Exports here are labour intensive, and the cost of input is also increasing in Gurgaon; the infrastructure, power and similar issues are putting a question mark on Gurgaon’s viability as an industrial destination,” she says. Industry experts second her opinion, saying that garments manufacturing remains a very labour intensive process, despite increasing automation. With low productivity common in the region, the time has come for introducing productivity linked wages, and also hiring on short term basis, to meet the seasonal orders from overseas buyers.

Surinder Anand  says that to achieve the apparel export target of 18 Billion US$, production capacity of apparel units would need to be increased substantially. The required investment in the industry has not been forthcoming, as most of the garments manufacturing units are still in the small sector, he admits. 

There are some other measures that the industry says should be taken by the government, to help the export sector get through this tricky period. Jagdish Bellany, of the Apparel Exporters and Manufacturers Association, says that there is an urgent need to hike duty drawback rates by 5 per cent, by increasing the scope and coverage of duty drawback scheme, so as to ensure full reimbursement of excise duties, custom duties, service tax, education cess and various state level taxes.

Bellany further says that there is need to accept and implement the recommendations of the Task Force on Transaction Cost in Exports, to reduce the transaction cost so as to enhance export competitiveness. There is also need to increase the rate of service tax refund, from 0.15 per cent to 1.5 per cent, in view of the 2 per cent increase in the service tax rate from 10 to 12 per cent.  “Import duty on manmade fibres  should be reduced to zero, so that the garment exporters can get cheaper man made fabrics in the country,” asserts Bellany

Last, but not the least, experts says that there is urgent need to ensure exchange rate stability. The sudden and unexpected decline in rupee value has negatively affected large exporters, who have hedged large positions, as no one expected such a steep fall in the value of the rupee.

It is thus quite clear that, to save the export sector from going into an abyss, the government will need to get rid of the bureaucratic mindset that impinges on growth. It must be realised that to compete with the 21st century world, India can not operate on an antiquated mental and operational set up. This country needs to wake up and change, to meet and overcome the tough
challenges ahead.


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