Apparel Online India Magazine June 1st Issue 2018 | Page 45

INDUSTRY LIVE
MEIS support extended…; industry sighs in relief
Finally some relief for exporters!
The Government has extended the
Merchandise Exports from India
Scheme (MEIS) for garments and
made-ups beyond June 2018, for
an indefinite period of time. MEIS
was introduced by the Government
of India under the Foreign Trade
Policy (FTP) 2015-2020, effective
from April 1, 2015. The industry has
welcomed this move of the Ministry
of Commerce and Industry. “The
extension of the scheme has come
as a breather at a time when the
industry is reeling through a tough
period,” stated AEPC Chairman
HKL Magu. Terming the extension
as a major relief to the exporting
units, TEA President Raja M
Shanmugham said that the apparel
exports gained a 4 per cent MEIS
benefit from November 2017 and
it was then announced that the
scheme would be valid till June
30, 2018 only. However, a further
extension is really a welcome step.
The extension in MEIS scheme
has given the industry a breather
and sanction to request to ensure
that all embedded, non-reimbursed
Central and State levies be refunded
which will help in restoring the
competitiveness of Indian exports.
The move gains more importance
looking at the continued downward
trend of apparel exports. As per
the latest report, India’s apparel
exports show a decline of 22.76%
for the month of April 2018 as
against the corresponding month
of April 2017. In April 2018, RMG
exports were to the tune of US $ 1.34
billion (approx.) as against the
corresponding month of April 2017,
when the exports were US $ 1.74
billion (approx.). In rupee terms,
export for the month of April 2018
was Rs. 8,859.67 crore as against
Rs. 11,272.24 crore in April 2017,
showing a decline of 21.40%. This
is the 11th straight monthly decline
in apparel export.
ICICI Bank's option
contracts with garment
exporter are void
In an interesting case, Freelook
Fashions versus ICICI Bank, a court
in Coimbatore has issued an order
against ICICI Bank in a matter
involving a set of option contracts
submitted by Freelook Fashions.
The bank is in the process of
filing an appeal against this order.
Demanding a CBI enquiry into the
issue, Raja Shanmugham, President,
Tirupur Exporters Association
(TEA), alleged that various banks
have used such derivative contracts
for a short period during the
previous Government’s tenure, when
the rupee strengthened at Rs. 38-39
per dollar, from Rs. 46 a dollar. The
banks sold the contracts at a higher
rate as the dollar value shot up over
Rs. 50 soon after that. The banks
have caused a huge loss to the
exchequer. The loss from Tirupur
alone would be around Rs. 4 billion.
Freelook Fashions, a garment
division of Anugraha Fashion Mill,
Tirupur that manufactures and
exports hosiery garments to United
Kingdom and Ireland, had moved
the court to declare eight option
contracts that it entered into with
the bank as void and unenforceable.
These option contracts were issued
to hedge the forex, underlying the
risks the company is exposed to in
its exports business. The garment
exporter said that the bank had
entered into a credit arrangement
with it in 2007, offering derivative
limits to hedge underlying
transactions or exposure. Eight
option contracts were signed and
later the bank advised that huge
losses had been suffered by the
company related to the contracts,
due to unfavourable currency
movement. The bank also asked the
company to execute an ISDA Master
Agreement, dated July 2007, stating
that they incorporated the standard
terms and conditions, it alleged.
The company approached forex
experts, who said that the option
contracts signed by the company
were illegal, violative of Foreign
Exchange Management Act (FEMA)
and unenforceable by law.
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