Strong Rupee A Bane For Carpet Exports

The strength of the rupee is proving a bane for carpet exporters in the face of currency devaluation by rival countries that has made their products cheaper.

Major competitors like China, Pakistan and Iran have devalued their currencies against the dollar and their carpets are available at much lower prices. This has also drastically brought down the prevailing international prices, says Carpet Export Promotion Council (CEPC) chairman O P Garg.

Indian exporters are losing ground as they are not in a position to offer lower prices, Garg said, adding that the situation had been compounded further by the high rate of interest on pre-shipment and post-shipment credit.

The devaluation by these countries had further narrowed the profit margin and the exporters were losing interest in carpet production and export, Garg said. The carpet industry, which has been in the eye of a storm in the European market over the bogey of child labour, posted negative export growth in the first eight months of 1996-97, reversing the trend witnessed in the past two decades.

The situation, however, improved slightly in the subsequent three months and the latest export figures, as compiled by the council, shows a 3.5 per cent growth in dollar terms during April-February 1996-97.

Iranian carpets are available at one-fourth the value prevalent five years ago in the global market, the Chinese products are on offer at 40-50 per cent lower prices and Pakistani goods are available at 30-40 per cent lower prices.

This is a problem which the industry is facing today, CEPC executive director T S Chadha said. He mentioned that cash incentives, which were earlier available to small exporters, had been withdrawn by the government.There was nothing positive in the new Exim policy for the carpet industry and the enhancement of limit for export houses could result in the small exporters being totally wiped out, Chadha remarked. According to the new Exim policy, to obtain export house status, the annual export performance of the preceding three years has to be Rs 20 crore, against the earlier stipulation of Rs 10 crore. The CEPC chief said that, due to unfavourable government policy towards carpet manufacturers and exporters, most of the producers were trying short-cuts by producing low-quality carpets, which took only a few weeks as compared with about six months taken to manufacture a quality product.But these low-quality products were being rejected in the global market, the council chairman added.

Garg said the prices of New Zealand wool had gone up by about 40 per cent in one-and-a-half years.

In making low-grade carpets, Garg said, the value addition by the expert weavers was just 50 per cent, whereas in the case of high-quality products, it was about 500 per cent.

The freight on board value realisation is less in case of low-quality carpets, which is not good for the country, Garg said.