Global uncertainties hitting demand in apparel sector, says AEPC Chairman

 In an exclusive interview, Dr A Sakthivel, Chairman of Apparel Export Promotion Council (AEPC) said that the profitability of SMEs in apparel sector is facing the heat of consistent decline in Indian rupee. He further conveyed that many SMEs are not able to fully use their installed capacity, which in turn is negatively impacting them.

What is the role that AEPC plays for the Indian SME sector?

Dr A Sakthivel: AEPC plays pivotal role in facilitating the trade to SME units of apparel exporters. We currently have 8000 exporters as our members and more than 85% of them are under SME category. Besides the day to day support in trade affairs, AEPC is also providing the SME's good platform to equip themselves with all modern way of supply chain management practices. There are various policies announced by the government in support of SME's of India which are regulated and facilitated through AEPC. To give them exposure of international marketing and to improve their business, AEPC organises exhibitions, fairs, and buyer seller meet in domestic and overseas markets. After, quota phase out, capacity building of SMEs in terms of handling demand and availability of work force has been taken very seriously. To accomplish the objective of capacity building, various ATDC centers have been opened all across the apparel clusters where workers are trained to handle modern machineries. Moreover, technical modernisation, supply chain management, to comply with the WTO regulations and spreading awareness about benefits of FTA/PTA among SME's have been taken onboard. AEPC keeps on organising workshop and seminars in apparel clusters across the country. We have gone beyond this by launching the DISHA project which is aimed at encouraging socially responsive business practices among the Indian apparel exporters.

What are the current projects being undertaken by AEPC?

Dr A Sakthivel: Currently, AEPC is engaged in the project of Knitwear Technology Mission, DISHA- a project on Capacity Development and awareness on Social and environmental Compliance of Indian apparel industry. Besides this fairs, exhibitions and buyer-seller meet at domestic and overseas market is our yearly feature. Since last three years, India is facing stiff competition in international market specifically from the South-Asian and Southeast Asian competitors. To understand the reason for India’s low performance and create a strategy which can help in increasing the Indian apparel export share in world trade, we have established sub-committee on competitiveness and on innovative garments which are doing fantastic job. Once the study is completed we would be in a position to understand the changing dynamics of competition and how Indian exporters can cope up with the pressure of competition. All these inputs and knowledge will add to our capacity which will be shared with the SME sector for their export promotion.

How do you feel the SMEs are performing in the apparel sector?

Dr A Sakthivel: In the current fiscal year, SMEs are facing problem in getting more orders as the rupee is falling and possibility of getting business from US and EU is little hazy. Some of the SMEs are not able to utilize the 60% of installed capacity, which in turn is affecting their profitability.

Do you feel that exports are placed aptly for these SMEs?

Dr A Sakthivel: Yes, apparel sectors are well suited for the SMEs. As a matter of fact, 85% of Indian apparel export to world is contributed by the SME sector alone.

About 45 lakh people in the textile sector have lost jobs in the last two years. How do you think the sector will perform during the present fiscal?

Dr A Sakthivel: The uncertainties in the western markets have impacted the demand position. If you look at the import of major markets, like US and EU which contributed 80% of our total export to world, registered decline in volume wise import which suggests that in term of quantity export are not increasing. However, with the focus given to textile and apparel sector in the recent Foreign Trade Policy (FTP) announced, we are hopeful of a speedy recovery.

How do you find the annual supplement to Foreign Trade Policy announced recently?

Dr A Sakthivel: I am thankful to the Hon'ble Textile, Commerce and Industry Minister for giving the industry such a wonderful package this year. With 2% Interest Subvention, 2% Market Linked Focus Product Scheme to US & EU and for giving a new post export EPCG Scheme, the exporters can improve their competitiveness. On behalf of the industry, I assure our Minister full support in trying to achieve the targets set for this sector. I hope we would be able to achieve the targets of $18 billion given by Ministry of Textiles for the FY 2012-13.

How is it likely to help apparel exports? Please share some benefits and outline what else could have been incorporated.

Dr A Sakthivel: This policy will support apparel industries in multiple ways. It will help exporters in terms of diversifying their market base, along with the modernisation of the units because EPCG and TUFS status holder schemes have been extended. Newly permitted utilisation of scrip's under FPS, FMS and MLFPS for payment of excise duty for domestic procurement would definitely help the apparel SME exporters. Simplification of export procedures like Advance authorisation at all EDI ports, export benefit to sample shipped from Delhi and Mumbai and single revolving bank guarantee for different transaction would definitely help in bringing down the transaction and would surely fasten the delivery time.

What are the main challenges the SMEs in the apparel sector are witnessing? D

Dr A Sakthivel: Underutilisation of installed capacity, increased wages, stringent labour laws and unstable world apparel demand are the major causes which are affecting the SMEs sector.

Do you feel that government policies are working in favour of the SMEs?

Dr A Sakthivel: Yes, if we look from the export policy point of view they are helping exporters to increase their exports. However, there are certain policies like labour laws which do not favour the apparel exporters as the apparel business has changed drastically in the global map. There are changes in demand patter like delivery schedules are becoming short, apparel export facing seasonality in demand for which Government is trying to find ways.

Kindly share the roadmap of your council for this fiscal.

Dr A Sakthivel: For this fiscal year ie. 2012-13 Ministry of Textile has set target of $18 billion. To resist the jolt of world economic crisis, we have made certain strategies wherein we are emphasising on the diversification of market base. To diversify the market this year, we are organising mega show in Tokyo, Japan which is the third largest importer in world and India's share in import is less than 1%. Success of this show may bring huge apparel business for India as it has already concluded India-Japan CEPA, which became effective since August 2011. Under the agreement, duty free apparel import has been allowed in Japan since August 2011. We are organising buyer’s seller meet in Tel Aviv, Israel; Barcelona and Madrid in Spain and New York in US. We have also planned mega apparel show called magic fair in US.