Cancelled orders, halted production — how coronavirus threatens bleak fiscal for exporters

Indian exporters are facing massive shortage, and even cancellation in some cases, of orders. Labour-intensive sectors are fearing job cuts.

An employee walks past shipping containers at the Jawaharlal Nehru Port in Navi Mumbai | Representational Image | Photographer: Dhiraj Singh/Bloomberg

New Delhi: The unprecedented lockdowns around the world due to the coronavirus pandemic can wreak havoc for Indian exporters who are already facing massive shortage, and even cancellation in some cases, of orders even as the labour-intensive sectors fear loss of jobs.

Sharad Kumar Saraf, chairman and managing director, Technocraft Industries India Limited that deals in engineering goods exports, said the government is not doing enough to help the exporters.

“We don’t know what the government is doing. There is no authentic information from any quarters of the government. All countries are taking domestic measures to boost their exporters, only for India where no steps have been taken,” he said. “If this continues, exports from this country will be finished.”

Countries such as China, the US and the UK have announced stimulus package to boost their exports.

Saraf, who is also president of the Federation Indian Export Organisations (FIEO), says exporters usually witness full order books around this time and scramble to finish their consignments. But the situation is just the opposite this year, he said.

“This year, the order book positions of some of the labour-intensive sectors such as textiles, gems and jewellery, footwear and others have gone into negative. The situation of engineering, chemicals and plastic exports are also severe,” Saraf added.

Halt in production, cancellation of orders

According to some of the leading exporters of consumer goods, whose clientele are mainly the developed markets of the US and Europe, are facing sudden halt in production of their goods, cancellation of large-scale orders and loss of customers.

As a result, they fear, they will have no option but to let go of labourers as factories come to a screeching halt.

The US, the UAE, Germany, the UK, Singapore, Italy and China, among others, serve as the top destinations for Indian engineering exports, which are the largest contributors to the country’s basket of merchandise exports.

“Trade is crippled in most of these destinations due to a near collapse of global supply chain even as the cargo movement has stopped. The warehousing capacity is over-stretched with severe blocking of export finance. The international shipping lines are affected. Even the urgent and less bulky cargo through air routes is paralysed with the airlines trimming their operations,” said Ravi Sehgal, chairman, Engineering Export Promotion Council (EEPC).

Fiscal relief and credit flow for SMEs

Sehgal added that exporters, especially those in the highly job-oriented SMEs (Small and medium-sized enterprises), need immediate fiscal relief and credit flow to keep their workforce and essential plant and machinery, in running operations.

“Forget about June-July, we have been asked by our customers in the US and the UK, to stop the ongoing production. They have become very panicky. All leading shops in those markets are closed. No consumer goods are being sold. Ongoing orders have been cancelled and we have to stop production,” said Rafeeque Ahmed Mecca of Chennai-based Farida Group, which sells leather footwear, handbags and other leather goods to international retailers such as Clarks, Marks and Spencer, Florsheim and Rockport among others.

Ahmed said he is anticipating a 30-40 per cent fall in the export of leather goods in April-May quarter and the situation can worsen in the coming months as order books for the upcoming summer and autumn seasons are down to nil.

“Customers are asking us not to send any shipment, banks are creating issues and shipping lines are increasing their freight rates as they are getting less containers. Government should announce some package to tide over the situation,” Ahmed added.

The situation is even worse for textiles and garments exporters, who are facing huge difficulties due to shutting down of stores in the US and European markets as shoppers ditch the markets in the wake of a lockdown and quarantining.

“The situation was mild a week ago, but in the last three days, it has gone from bad to worse. All the stores there (America and Europe) are shut. Customers have cancelled all orders, some are even returning the shipments. This is unprecedented. I have never seen anything like this happening in the last 40 years of my business,” said a leading Delhi-based textile exporter who refused to be named.