Weakening dollar worries Kerala's textile industry

Dec 13, 2007, 8:53 GMT

Kannur (Kerala), Dec 13 (IANS) As the US dollar weakens against the rupee, the going is getting tough for textile exporters here. The dollar, which fell around 15 percent from March this year, has burned a Rs.450-million ($11.4 million) hole in the pockets of exporters.

Kannur, around 350 km north of Kochi, is Kerala's leading textile export hub. Its export of textile products is worth around Rs.3 billion a year, according to industry sources.

'From this January, as new deals are made, we have to renegotiate the prices as the falling dollar is affecting profitability. But hiking prices is quiet a difficult task,' M.P. Ranjith Kumar, managing partner of the Kannur Handloom Exports, told IANS.

In the textile market, Kannur is known for home furnishing products. 'Kannur provides closely woven and high-value fabrics,' Ranjith Kumar said.

Karur in Tamil Nadu and Panipat in Haryana are the two other centres in India for home furnishing fabrics.

To remain afloat, textile manufacturers here are hard-pressed to cut costs, improve productivity and even alter the product mix.

'To cut cost, the government can help in a big way. Transaction cost is an area where the government can do a lot. Reduction in service tax on shipping and exhibitions organised abroad will help us cut costs. Likewise, the fringe benefit tax is also adding to the cost of operations,' he said.

'Though the commerce ministry has made certain proposals to help the sector, the government is yet to act on this.'

The exporters are also worried about the effect of fuel price hike, which they feel is imminent.

The implications of the weakened dollar on country's production sector, like job losses, are expected to be evident in the January-May period next year, when exporters strike new deals with clients.

'Till now, production remained unaffected as producers were working on existing contracts. Nobody will default on this, as it will invite penalty,' Ranjith Kumar said.

To escape the impact of the devalued dollar, exporters are also trying to negotiate deals in other currencies.

'Deals in euro or pound are better. But buyers stick to the dollar as they have to pay less dollars for their buy,' he said.

A hike in price may result in loss of market to Pakistan, Bangladesh and China.

'Chinese products are 22 percent cheaper than ours. With the devalued dollar, this is widened to 35 percent. Kannur did not face the Chinese threat because the Chinese would take only big orders while we catered to smaller clients. When a Chinese company takes orders only above 10,000 metres, we are ready to attend to orders as small as 300 metres,' said Ranjith.

'Pakistan is also a tough competitor. They are quoting unbelievably low prices. Labour is cheap there; and cotton, too,' he added.

Frequent strikes at Kochi port is also burdening exporters, as they have to send their consignments to the Tuticorin port.

'This doubles the transportation cost, affecting our bottom line,' Ranjith added.

Kannur has around 40 textile export units. The sector employs around 50,000 people in the district.

© 2007 Indo-Asian News Service