India’s $108-billion textiles industry, which helps the likes of Gap and Macy’s stock their store shelves, is seeking a bailout package on their foreign exchange liabilities after the lockdown prompted cancellation of orders that were to fetch payments in dollars.
Losses in forex contracts could run into crores of rupees for the exporters that had used anticipated dollar receivables to enter into contracts with banks. To cover the hedging liabilities, the industry is seeking benefits similar to the moratorium extended to borrowers, who now have a three-month grace period on repayments.
Textile exporters book forward contracts against overseas receivables to protect their cost or to earn premiums. On shipment, they provide documents to banks booking the contracts. Due to cancellation and delays, they are unable to provide the bill of lading and other documents.
If exporters are not able to ship, they do not receive the money from overseas buyers. In such cases, they have to unwind those forwards deals booked up to six months in advance at a loss of 2-4 rupees/unit of dollar, dealers said.
Abhishek Goenka, CEO of IFA Global points out textile exporters should be given some flexibility to manage their dollar delivery in the form of some extensions so they do not have immediate cash flow problems considering (that the lockdown is) no fault of theirs.