Small exporters face Re threat

NEW DELHI: Hardening of the rupee has emerged as a major threat to small export businesses.

While the falling dollar has impacted the profits of all exporters, it is the small exporters who are suffering the most since they do not have enough resources for hedging or factoring their exchange rate risks. A group of small exporters approached Prime Minister Manmohan Singh on Tuesday to seek his intervention.

According to the Delhi Exporters Association (DEA), as many as 10,000 exporters might go bankrupt and be forced to shut shop if the government does not intervene. “

Exporters have booked their export orders on the basis of the US dollar valued at Rs 45. With the dollar falling below Rs 42, not only have profits been wiped out, exporters will have to face big losses in fulfilling their export commitments,” DEA president SP Agarwal said. If exporters do not fulfil their export commitments, they stand the risk of being sued by foreign buyers and losing future orders.

“We have petitioned the PM to intervene and save us. If the government cannot control the exchange rate, we should be allocated funds from the PM’s relief fund to help us meet our commitments,” Mr Agarwal said.
Speaking to ET, Federation of Indian Export Organisations (FIEO) director general Ajay Sahai said his organisation was advising all exporters to go in for some sort of risk coverage, such as hedging or factoring, but it was not possible for small exporters to get such cover. “It will not be cost-effective for small exporters to get risk coverage,” he said. Small exporters, therefore, have no other option but to wait and watch.

To make matters worse for them, Mr Sahai said exporters could not count on a reversal of the situation in the near future. “With the flow of foreign funds into India on the rise, there are indications the rupee is going to get stronger,” he said.

Mr Agarwal said while all small exporters were hit by the hardening of the rupee, the main sectors that would be affected include handicrafts, made-ups, textiles, readymade garments, leather goods and engineering items.