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Premiums on garment quotas to US crash

Nina Varghese

CHENNAI, Feb. 21

THE premiums on garment quotas to the US have crashed over the last few weeks as a direct result of the slowdown in consumer spending in the US.

In the fast moving categories such as shirts (340), trousers and shorts (347), the premiums were down to Rs 60 per piece from a high of Rs 150 for shirts and from Rs 255 to Rs 140 for trousers and shorts. According to market sources, most of the quotas b eing traded are mostly speculative buying by quota brokers and are not backed by orders.

Though exporters were aware of this slowdown, the low cut off prices, of around $ 6, at the opening of the first-come- first-serve (FCFS) quotas in January gave the first indication of the poor order position from the US.

Market sources said that many garment exporters are without orders this season as US buyers have not been forthcoming. This has been attributed to the retail slowdown and to major retail chains such as JC Penney and Sears Roebuck & Co closing down a larg e number of stores to trim costs and combat recession.

Sources said that many of the leading retail brands are also delaying payments to Indian exporters. Ms Reshma Rao, Secretary, Apparels and Handloom Exporters' Association (AHEA), said that exporters have to apply to the Reserve Bank of India (RBI) for ex tension of time for the realisation of export proceeds. Even site Letters of Credit (LC) which took 15 to 20 days are now realised only after to 60 to 90 days. In addition to this delay, Ms Rao said that the RBI and the Customs Department actively follow up on the realisation of the export proceeds and ask exporters to refund the drawback if the export proceeds are not realised.