Financial Daily from THE HINDU group of publications
Wednesday, Jan 05, 2005
Industry & Economy - Textiles
Curtains for textile quota brokers?
New Delhi , Jan. 4
IF the wiping out of quotas in global textile trade has the exporting community celebrating, the January 1 deadline has come as a big blow to a large number of people who have been put out of work.
Those left high and dry include a few thousand `quota brokers' involved in hoarding of quotas, the documentation staff employed with export houses and a large number of Export Promotion Council (EPC) staffers who did the actual distribution of quotas.
"The abolition of quotas from January 1 has put the `quota brokers' and the vast array of middlemen, who were involved as intermediaries between exporters with excess quotas and those needing the quotas to execute an order, completely jobless now. A majority of these middlemen were involved in hoarding quotas at premiums of nearly 50-70 per cent to exporters in need of quotas," an industry representative said.
The modus operandi that the brokers used was time tested and followed market mechanics. While the 40-year old quota regime was in place, exporters required quotas entitling them to ship particular quantities of consignments to countries such as the US, EU and Canada.
Of the total quotas available, nearly 80 per cent were transferable. Quota brokers would buy out the transferable ones from exporters who had excess quotas and sell them at a premium.
"A lot of black money changed hands and the middlemen resorted to frequent hoarding of quotas to jack up prices of `hot quota items' such as item numbers `346, 347' that denoted gents and ladies trousers and shorts for the US market. With quotas having been abolished, the entire lot of quota brokers have to look at alternative sources of livelihood," industry sources said. The new quota-free regime has also rendered redundant a large proportion of the documentation staff employed by export houses. It has especially impacted those involved in preparing quota applications, furnishing bank guarantees and earnest money documents and those appearing on behalf of the export houses at the appellate council meetings.
"We have been trying to redeploy as much of the documentation staff and train them for other assignments such as encashing letters of credit and invoice preparation. Excess staff would obviously have to go," a Delhi-based exporter said. Organisations involved in the quota distribution process the Apparel Export Promotion Council (AEPC) and the Textile Export Promotion Council have been gearing up for the quota abolition by trying to reorganise excess staff.
Nearly 80 per cent of the staff of EPCs in the textile sector had been involved in the quota allocation and distribution process at their respective regional offices.
"We have been offering VRS over the last couple of years to gear up for tackling the problem of excess staff following the quota abolition. Others are being redeployed," an AEPC official said.
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