Handloom made-ups manufacturing units in Karur, a highly export oriented industry which powers the economy of the town, has been severely hit by the COVID pandemic. The units are facing huge losses due to cancellation of orders and deferred payments.
Since the last week of March, not many export shipments have gone out of Karur. According to industry estimates, the handloom textile units are sitting over stocks worth about ₹500-600 crore as orders were cancelled one after other as the pandemic wreaked havoc from one country to another in Europe and the USA.
About 750 MSME units in the town are involved in manufacturing and export of made-ups such as table cloths, kitchen towels, bed sheets, curtains and other home furnishing products. Annual exports from the town is valued at between ₹3,500 crore - 5,000 crore. The industry employs about 1.50 lakh employees directly and provides indirect employment to an equal number. Importantly, it employs a large number of semi-skilled and unskilled workers.
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“Cancellations have been high – 40 to 50%. It varies from unit to unit, buyers and the country. We are staring at a total loss of about ₹500 - 750 crore this year,” rues ‘Atlas’ M. Nachimuthu, president, Karur Textile Exporters Association.
The pandemic has hit Karur where it hurts the most. “The major part of our exports goes to the USA and European countries such as Italy, Spain and France. Unfortunately these are the countries which are worst hit due to the COVID-19 pandemic,” explains A. Sethu, Chairman, Confederation of Indian Industry, Karur.
“The immediate challenge is the cancellation or deferment of orders. The orders which we have planned to ship for the summer season, between April and June, have been halted by our importers. Our products are season oriented and cannot be sold in the next season (autumn) as the designs and colours would change,” he adds.
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“Many customers also want to renegotiate payment terms. They want a longer credit cycle. All this is putting us in a highly stressed business environment”, observed K. G. Prithivi, Secretary, Karur Textile Exporters Association.
The immediate worry for the textile units is the need to pay the salaries of employees for the month of April, as directed by the government. “With no revenue, we have to manage our overheads and pay the salary. This is a big challenge. We request the government to take a liberal view on this and support employees by utilising the huge sum of unclaimed money available with the Employees State Insurance Corporation of India and Provident Fund, which is meant to provide social security to employees,” observes Mr. Prithivi.
The industry has also put forth other demands to the government. “The moratorium on term loan repayment should be extended to a year. The government should also offer interest subvention on loans and working capital limits should be increased to all MSMEs,” suggests Mr. Nachimuthu. He also wants the government to take steps to restore domestic and international courier operations so that the exporters were able to get samples and whatever orders they manage to keep themselves going.
The Reserve Bank of India has announced some stimulus to the industry but seeing the world scenario the measures should be stepped up. “Some relaxations has been given in Provident Fund payments and government has taken liability to pay both employer and employee portions but this is applicable only for units with less than 100 employees. This should be extended to all units,” requests Mr. Sethu.
Returning to pre-COVID situation is not a scenario that many exporters visualise now. “Our business will not be back to normal even if the situation improves here; much depends on the USA and countries in Europe returning to normal. It will take three to six months for a clear picture to emerge,” observes Mr.N achimuthu.
“Bouncing back to pre-COVID situation may be at least 18 to 24 months away provided the whole world returns to normalcy and people regain their spending capacities. Our products are not essential items and buying home furnishings will be the last thing on the mind of people recovering from the economic crisis caused by the pandemic,” observes Mr. Prithivi.
Most exporters say that the industry will face shrinkage of operations in the near future. “Even if we resume restricted operations, we may operate only to 30% of capacity due to poor demand. Retrenchments and downsizing will be the order of the day. Some weak players may even be forced to shut. Unless there is government support, it will be a very tough scenario,” says Mr. Prithivi.