The Federation of Indian Export Organisations (FIEO) has alerted the centre over the possibility of increased defaults in the export business sector because of the novel coronavirus (COVID 19) outbreak linked cancellations and reduction in number of orders.
The exporters wanted to flag off the issue to the government and inform that there would be delay in declaration of company accounts.
Also, it warned the centre pertaining to the lack of business, coupled with fixed costs, would soon make many accounts technically NPAs .
“The spread of Covid 19 to over 144 countries points to the most challenging times for the exports sector. Near lock down and quarantine in many advanced economies has given a jolt to the demand and added to the rising uncertainties with looming recessions in large number of economies with consequent fallouts”, Sharad Kumar Saraf, President, FIEO says.
The MSMEs particularly in employment intensive sectors like carpets, handicrafts, apparels, footwear, gems and jewellery, marine and perishable with their major market in Europe and the USA are likely to be worst affected, particularly in first quarter of FY 2020-2021, as per the current trend, FIEO estimates.
“The export sector has started feeling the pinch with many requests from buyers to hold back shipments till further instructions. We feel that a significant number of such requests may eventually lead to cancellation of orders. Even in cases where Indian exporters are adhering to the terms of contract, the force majeure clause are likely to be invoked by buyers to deny claim/liability raised by exporter”, Saraf says.