Covid-19 pandemic: Labour-driven export sectors run for cover

New Delhi | Kolkata: The country’s labour-intensive export sectors such as leather, textiles, gems and jewellery, carpets and handicrafts have borne the brunt of the Covid-19 pandemic with orders getting cancelled, shipments delayed indefinitely, payments missed and consignments stuck at ports.

According to sectoral estimates, about ₹7,600 crore of leather export orders have been cancelled, ₹2,000 crore carpet orders are stuck and handicraft sector losses are seen at ₹8,000 crore.

“Around 30% of orders of labour-intensive sectors have got cancelled,” said Ajay Sahai, director general of the Federation of Indian Export Organisations (FIEO).

The issues are set to be discussed at a meeting that commerce and industry minister Piyush Goyal will hold with the various export promotion councils on Tuesday.


India’s exports contracted 1.5% to $292.9 billion in the 11 months to February 2020. The decline is likely to be much sharper going ahead.

Cancellation of Trade Fairs

Export orders worth $1 billion were cancelled in the past 10 days and many customers have stopped payments, said Council for Leather Exports chairman Aqeel Ahmed Panaruna.

“Customers are not paying invoices and all new orders are cancelled. Our American clients are not taking products that are ready for them,” Panaruna said.

India’s Rs 12,000 crore carpet industry is also in distress with orders worth Rs 2,000 crore stuck and besides it’s running short of workers due to the lockdown.

“We do 40% of our business in the January-March period. The lockdown will have long-term consequences,” said Siddh Nath Singh, chairman, Carpet Export Promotion Council. The handloom, handicraft, carpet and cottage sectors employ around two million people. India’s gems and jewellery exports fell 19% in February and are estimated to decline 12% in FY20 to $35.85 billion on year, according to the Gem & Jewellery Export Promotion Council (GJEPC).

“In February, when the deadly virus spread in China, Hong Kong and Far East, gems and jewellery exports had plunged by 19.37% in comparison to February 2019,” said Colin Shah, vice chairman, GJEPC, and a leading diamond exporter. “But the situation worsened in March when it spread to Europe and the US.”

Cancellation of key trade fairs in the US, Hong Kong and Jaipur also impacted the jewellery business.

According to a Delhi-based exporter of garments, around 70% of orders have been postponed or cancelled and since this is a season-dependent sector, apparel meant for export will likely go waste.

The handicraft industry fears closure of 60-80% of units in three months if the situation doesn’t improve as buyers are not paying, have cancelled orders already under production or are taking advantage of the situation by negotiating for discounts. “An initial estimate of the impact that the handicraft sector may suffer in wake of the existing crisis is approximately Rs 8,000-10,000 crore,” said Export Promotion Council for Handicrafts (EPCH) director general Rakesh Kumar.

Exporters have sought an increase in pre and post-shipment credit duration to 180 days from 90 days now, besides getting international couriers to function, as sending documents has become a challenge given that all flights have been halted.

“It is suggested that banks should be advised not to levy any charges on the exporters while cancelling forward contracts in those cases where the export orders are cancelled by the overseas buyers,” textile exporters have written to Goyal.

Cancellation of forward contracts involves costs that the banks get from exporters.

Exporters want the government to provide freight subsidies for goods that are brought back to the country, compensation in some form if items have to be abandoned or if discounts have to be given to buyers. They have also asked for a delay in declaring loans as non-performing assets for a year owing to the lack of business coupled with fixed costs.

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