A desolate silk unit in Bhagalpur. Picture by Amit Kumar

The fall of the rupee has cast its effect on the century-old silk industry here and is showing signs of snowballing into a large-scale market uncertainty.

Many exporters, who had received orders from abroad, are now finding it difficult to deliver consignments on time owing to increase in raw material cost.

Pranesh Roy, a silk exporter said it is tough to send a consignment of 2,000m woven cloth made from linen yarn (an imported yarn from Spain) to his customer in US. “Around seven to eight days ago, I received the order but since the price of linen has soared to Rs 725/kg, I will incur a loss of more than Rs 50,000,” he said.

Many exporters and manufactures said they are incurring losses in executing old orders. “Since we have to depend on imported yarns, mostly from abroad, supplying consignments against orders used to take time. Now we don’t have any other option but to suffer losses. We cannot refuse old orders. It would be against business ethics and can hamper our relation with our foreign customers,” said Moti Bhai, an exporter.

Alim Ansari, a member of Rajya Bunkar Kalyan Samity, a body of weavers and also an exporter, said the industry’s present scenario is grim, as the silk market is facing losses of around Rs 13-15 crore every month.

He said: “Most yarns like linen, tasar, dupian, kathan and flatcher are imported from countries like Spain, China, Korea and others. However, within the past four to five days, all the yarns witnessed a hike of Rs 50-150 per kg. If a manufacturer had received orders five or six days back, he has to bear the increased cost and also incur losses of Rs 20-25 per metre of cloth.”

“At present, we are at a financial crossroad. If we do not execute the old orders, we would face a long-term adverse effect on our business,” he added.

Sanjit Kumar, a chartered accountant, blamed the liberalised remittance policy of the Reserve Bank of India.

Under the liberalised remittance scheme, all resident individuals, including minors, are allowed to freely remit up to $2,00,000 per financial year for any permissible current or capital account transaction or a combination of both.

“The nation’s economy is going through a crisis. Since 2004, the remittance limit was increased from $25,000 to $2,00000. However, on August 14, 2013, the RBI decreased the limit to $75,000. Now, the RBI has restricted remittance for acquiring immovable property outside India but included remittance to set up joint ventures and wholly owned subsidiaries. Other schemes, too, had not been monitored by the RBI.”