As quotas go, so do apparel export firms

IT'S a case of apparel export firms doing the disappearing act, and quite literally so. From a total of around 33,000 apparel export firms registered with the Apparel Export Promotion Council (AEPC) about five years ago, the number of firms has come down drastically over the last couple of years to around 22,000 at present. And this number is further expected to dwindle, with a likely final count of only around 2,500-odd apparel-exporting firms by January next year, when the quota regime in the global trade in textiles and clothing is completely phased out.

No, it's not competition from Chinese apparel manufacturers forcing Indian exporters to shut firms but Indian exporters finally are winding up firms that were opened exclusively for bagging quotas. With the quota regime being phased out, the utility of these firms is over and so exporters are winding them up, an Apparel Export Promotion Council (AEPC) official said.

In fact, there are instances of a single exporter opening up to 100-150 firms just to bag the quotas. "Opening up a number of firms has been necessitated by the Government's quota allocation policy of distributing export entitlements on a first-come-first-served basis. The units being operated by each exporter would, thereby, get distributed between the firms," a leading exporter said. With the quota system being abolished, a number of players who had opened firms only to bag quotas have begun the process of dismantling them and therefore stopped registering them with AEPC, he said.

Even though firms are getting dismantled, the inefficiencies in the sector would, however, stay, according to an Indian Cotton Mills Federation (ICMF) official. "The existing number of units are being consolidated under fewer firms, even though these units continue to be disjointed due to unfriendly labour laws and lack of availability of large lots of fabric with shade consistency," the ICMF official said.

With fewer firms vying for quotas in the run-up to the dismantling of the quota regime, India's utilisation of quota during the first four months of the calendar year has also slowed. According to AEPC figures, during the period January-April 2004, the utilisation of quota was down by 13.80 per cent compared to the corresponding period last year.

Source: Business Line, September 4' 2004