KOLKATA: The falling rupee has not brought much cheer to rice and tea industries. Rice exporters who had taken packing credit from banks in dollar terms at a time when the rupee was at 53-54 are now being forced to repay at the current forex rate of around 67-68.
On the other hand, the tea industry is being forced to renegotiate new deals with foreign buyers who are not keen to purchase tea at a price agreed upon when the rupee was at 58-59 against the dollar. MP Jindal, president, All India Rice Exporters Association, said, "We had taken packing credit in dollars when the rupee was at 53-54 level. Now the scenario has changed as the rupee has lost value against the dollar.
For this, rice exporters are facing losses. We are talking to banks about settling this issue." Packing credit limit is a facility sanctioned to an exporter in the pre-shipment stage. This facilitates the exporter to purchase raw materials and manufacture or produce goods according to the buyer's requirement and get it packed for export.
Packing credit limit covers all the working capital needs of the exporter including raw materials, wages, packing costs and all pre-shipment costs. Packing credit limit is available generally for a period of 90 days and the exporter has to pay a lower rate of interest compared to overdraft or cash credit facility. However, the silver lining is that basmati rice exports are expected to grow 10%.
"India's basmati rice is gaining popularity in Iran. Exports are expected to rise 10% which may take our overall exports of basmati rice to 34 lakh tonne," said Jindal. For the tea trade, a falling rupee has not augured well. "Importers are offering less dollars for new contracts that are being entered now following a drop in rupee value.
Orthodox teas, which were fetching $5 per kg in the global markets, are now being offered a price of $4 per kg. Similarly, CTC teas, which were garnering $4 per kg, are now fetching $3.2 per kg," said AN Singh, chairman, Indian Tea Association. A decline in tea prices in dollar terms will increase India's competition with Kenya in the world tea market.
Kenya's production has been good this year and the African nation has been loading teas in the world markets at an average price of $2.8-$3 per kg. "Though Indian tea companies will have some profit in near term, low prices will create more competition for Indian teas in the long term," said Singh.
Source:-economictimes.indiatimes.com
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