Banks start procedure of transferring money through letter of credit (LC) only after they receive necessary documents.
Nearly Rs 1,000 crore of Gujarat’s cotton yarn exporters have been stuck due to closure of domestic and international courier services in wake of the outbreak of novel coronavirus pandemic.
The exporters of yarn are finding it difficult to receive their money from buyers as they are not able to send documents related to Bill of Lading (BoL) to foreign banks (based in Mumbai) as well as to importers in different countries as courier services are closed since the announcement of nationwide lockdown.
According to yarn exporters, after the dispatch of yarn shipment, it would take 12 to 14 days to prepare BoL. Documents related to BoL are required to be presented before the bank. Then, exporters send copies of these documents through courier services to Mumbai-based banks (in different countries) where their buyers are having accounts. Banks start procedure of transferring money through letter of credit (LC) only after they receive necessary documents.
Exporters have sent shipment of yarns to China, US and the countries in Europe from Gujarat, said Saurin Parikh, president of Spinners Association of Gujarat, adding that unless importers receive the copies of necessary documents via courier, they wouldn’t credit money in the accounts of the exporters. Parikh said the government of India should take up the issue as early as possible to bail out Indian yarn exporters from this catch-22 situation.
Requesting anonymity, an exporter whose payment had been stuck said that until the courier services normalise, the central government should give greater benefit in duty drawback scheme to exporters of yarns.
Nearly 3,000 containers of yarns are being exported monthly from India and Gujarat-based traders are having the lion’s share in it. On an average, a container of yarns is worth Rs 50 lakh. As per an estimate, from March 10 till 24 this year, nearly Rs 1,000-crore payments have been stuck due to hampered courier services.
Gujarat’s spinning industry accounts for over Rs 30,000 crore. Of the total production, nearly 30% is exported to different countries. Over 70,000 people are working in nearly 120 spinning mills across the state. Following good monsoon, this year cotton crop would be over 100 lakh bales as compared to 90 lakh bales during the previous season.