CHENNAI, February 5: Everything has gone topsy turvy for lungi weavers of Vizhupuram and Kadalur. The South East Asian currency debacle has destroyed the warp and weft of the life of the weavers of South Arcot region. They are an angry lot and could make a difference to the fortunes of politicians seeking their vote in the forthcoming elections.Around one lakh lungi weavers have become jobless over the past five months. The looms are silent. Nearly one hundred weavers' cooperatives have closed. Export production has been stopped and exporters are struggling hard to survive. And over Rs 100 crore of colourful lungis made exclusively for South-East Asian countries have piled up.
The plight of P Arumugam, a top exporter and owner of Jaya Palayacat Co, a government recognised export house, is typical of the problems faced by the dozen exporters of Mannady near Beach Station in Chennai, who specialise in lungi exports to South-East Asian countries.
His company used to export 26 lakh lungis, worth about Rs 5crore every year to Singapore where he had his main buyers. Sixty per cent of the goods were re-exported to Indonesia, while the balance went to the Phillipines, Malaysia and Thailand. His turnover was a healthy Rs 6 crore in 1995-96 rising to Rs 7 crore in 1996-97.
Then the meltdown happened. His Singapore agent, who had extended a credit of Rs 2 crore to the Indonesian buyer, is refusing to pay up, claiming that he has suffered a huge loss, since his Indonesian buyer wants to settle at the old rate of rupiah of Rph 2300 to a dollar prevalent and not at the present rate of Rph 10,000 to a dollar.
Such unsettled bills have made Arumugam stop exports. He used to engage 4,000 weavers at Vizhupuram and surrounding areas in places like Panrutti, Tirukovilur, Kurunjipar and C N Palayam and Kadalur. Arumugam says he used to pay Rs 30 lakh per month as wages to the weavers. He claims he spent another Rs 30 lakh a month as raw material costs for buying yarn from spinning mills in Salem, Coimbatore and Gudiyatham.Now, because exports have stopped, more than half his stock remains unsold.
According to him, the crisis faced by exporters and south Arcot district weavers' cooperatives and weavers is primarily due to the South-East Asian currency debacle.
The Malaysian ringgit in June 1997 was 2.50 to a U.S. dollar. It fell to 4.84 to a dollar but is now quoting at 4.10 to a dollar. The Malaysian buyer bought goods worth $200,000 from Arumugam's Singapore agent at 2.50 to a dollar. He had to pay only 5 lakh ringgit then. Now because of the fall in the currency, he has to pay as much as 8 lakh ringgit. He says he will suffer a loss of 3 lakh ringgit if he settles the bill at the current rate and so offers to pay up at the old exchange rates.
The Singapore dollar was 1.43 to one US dollar on March 15, 1997. On February 4, it stood at 1.70, a difference of 27 cents. According to Arumugam, he had raised a bill for $58,850 on his Singapore agent and has lost Rs 4 lakh on this bill alone.
Arumugam claims that his totaloutstanding bill for exports until June 1997 was US $350,000, on which he has lost Rs 30 lakh because of currency depreciation. The Indonesian rupiah has declined by over 300 per cent to a dollar in four months. Malaysian ringgit is down 100 per cent, Thai baht by over 130 per cent, and the Phillipino peso by 60 per cent. The exporters have taken up the matter with the Handloom Exports Promotion Council, which is expected to convene a meeting soon.
According to him, export bills with banks including SBI have to be discounted at huge loss now due to these reasons. Cash incentive of 20 per cent on fob value of exports they used to get was stopped in 1991. Since then they were given duty drawback at 3 per cent which was increased to 7 per cent in 1996-97. But since January this year it is back to 3 per cent. Exporters also have to reckon with high interest rate of 12 per cent for payment of bills within 90 days. If settlement is delayed, interest is charged on the basis of `crystallisation', ie, for paymentdelays beyond 90 days, exporters are debited at the rate of 19 per cent on the full period of payment.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
