Use of Packing/Pre-shipment Credit in Foreign Currencies (PCFC) is still extremely low among apparel exporters despite its immense embedded advantages vis-à-vis ‘Pre-shipment Rupee Export Credit.’
Statistics provided by banking sources indicate that almost 90 per cent of exporters were using rupee export credit instead of PCFC in Tirupur knitwear cluster.
Lack of awareness among the exporting fraternity of the actual benefits of the PCFC coupled with the wrong notion that pre-shipment credit in foreign currencies may result in losses owing to volatility of rupee against foreign currencies, are cited by the industrial experts for its poor off-take.
The pre-shipment or packing credit means any loan provided by a bank to an exporter for financing the purchase, processing, manufacturing or packing of goods prior to shipment on the basis of letter of credit opened in favour of the exporter by an overseas buyer or for confirmed order.
Raja M. Shanmugam, a leading exporter and chairman of NIFT-TEA Knitwear Institute chairman, who is currently availing himself of the PCFC facility, told The Hindu that the using PCFC more at this critical juncture would create a win-win situation for exporters as well as buyers.
“Using PCFC means that the cost of funds comes down for exporters since the credit can be got at around 4.5 per cent interest (London Inter-bank Offered Rate plus 3 per cent to 3.5 per cent) instead of 11.5 per cent interest in the case of packing credit taken in rupee,” he said.
S. Dhananjayan, industry consultant and member of Institute of Chartered Accountants of India, pointed out that the reduction in cost of funds owing to usage of PCFC thus would attract more buyers to India for sourcing apparels. R. Girish, another exporter, is of the opinion that the time had come for industrial associations/bodies representing exporters to conduct technical interactions to promote excellent facilities offered by Union Government like the PCFC for helping Indian exporters remain competitive in global market.
