Rupee breaks 52 mark: Exporters under pressure to offer discounts

Chandigarh: With Indian exporters witnessing “unexpected” gains due to rupee depreciation against the US dollar, global buyers have started putting pressure on them to offer discounts of 5-10 percent on shipments, citing recessionary conditions or by finding fault with products.

The rupee, which has been Asia’s worst-performing currency against greenback, has fallen by a whopping 15 percent since July this year and is presently hovering above Rs 51 a dollar.Heavy dollar demand from some banks and importers, mainly oil refiners, weighed on the rupee’s fortunes, dealers said. They said concerns over foreign fund outflows from the domestic equity market and dollar demand from state-run oil refiners also reduced the rupee’s attractiveness.

Traders also said oil refiners, the largest buyers of dollars in the domestic currency market, would likely step in to cover import commitments around current levels, pressuring the rupee.

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Not wanting to “sour” their trade relations with buyers by getting into any argument amid a weak global economic sentiment, most Punjab exporters working in different industry verticals - including garments, sports goods and light engineering items - have begun to accept the “wishes” of importers.

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“The excitement of the depreciating rupee against the dollar is short-lived, because buyers have started pressurising us to offer the maximum discount on export of products in view of dollar appreciation, which will yield more realisation in rupee terms,” Wool and Woollen Export Promotion Council Chairman Ashok Jaidka said today.

Exporters said buyers are projecting that the rupee will soon depreciate to Rs 54 per US dollar and have asked for a discount ranging between 20-25 percent for booking new orders after factoring in the projected rupee value.

“But after hard bargaining, they finally settle at an 8-10 percent discount,” he said. Exporters pointed out buyers are going even to the extent of finding faults with products and have cited the poor economic scenario in their countries to get the maximum price reduction.

“It is buyers from Europe and USA, Middle East, African countries who are demanding a price cut,” said Engineering Export Promotion Council Regional Chairman S C Ralhan.

In the case of hand tools and other light engineering items, Punjab exporters are giving a 2-5 per ent discount to buyers, exporters said. Punjab’s annual exports amount to over Rs 13,000 crore.

While there is some “forced” reduction of product prices, in the sports good sector, there are internal arrangements between exporters and importers whereby exporters automatically decrease the rates of products after the exchange rate breaches a negotiated mark.

“We have to reduce our product rates once exchange rate goes beyond certain mark fixed with our buyer and it goes vice-versa when rupee appreciates,” a Jalandhar-based sports goods-maker disclosed, seeking anonymity.

He said buyers would always want their suppliers to reduce the price after they come to know that exchange rate fluctuation is giving good “returns” to exporters.

However, for some exporters, the fall in the rupee value against the greenback is not seen as a boost in view of a consistent increase in input costs. “Depreciating rupee is not a thing to cherish for us as input costs like steel have gone up substantially. Moreover, discontinuation of Duty Entitlement Pass Book Scheme was also a dampener for exports,” said Ralhan.

PTI