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Ministry misuses ‘force majeure’ clause

AEPC begins encashing Rs 200 cr of BGs as FM rejects Samadhan scheme

The Apparel Export Promotion Council (AEPC) is once again in the midst of controversy, this time, for encashing bank guarantees of garment exporters, without giving any time or reasonable notice to the exporters. This leaves the garment exporting lobby with no option but to move the court. Reena Mital reports.

Even as the AEPC has begun encashing the bank guarantees (BGs) of garment exporters, the exporters have decided to approach the high court (HC) to get a stay on the same. It is learnt that the RMG exporters in Chennai and Bangalore have already filed their petitions in the respective HCs, and Mumbai will do so this week. The funds involved this time are to the tune of Rs 200-300 crore.

AEPC’s move of encashing exporters’ BGs follows on the heels of the rejection of the ‘Samadhan’ scheme by the finance ministry recently. The finance ministry struck down the scheme even as the textiles ministry was quite upbeat about the passage of the scheme, and had been announcing the same at various fora. According to AEPC officials, “The council had been asked to hold on to the bank guarantees till November 10, after which the same should be forfeited. We have only followed instructions from the ministry.”

However, exporters have taken very strong objection to this haphazard way of dealing with RMG exporters. “The AEPC has gone ahead with the encashments, without giving any reasonable notice or time to the exporters. Moreover, AEPC officials have acknowledged that they did not receive any written communication from the ministry for encashing the BGs. The least the ministry or the AEPC could have done was to give some reason to the exporters for encashing BGs in such a hurry. One fails to understand why garment exporters are always being targetted and penalised by the ministry?”

What has irked the industry more is not just the ministry’s or AEPC’s high-handedness, but the discrimination and misuse of the ‘force majeure’ clause. In case exporters are unable to ship goods due to certain unforeseeable reasons such as earthquake, plague, strike, power outtage, etc, the BGs are returned under the force majeure clause. “However, this time, the force majeure clause has been used to justify very flimsy and stupid reasons - delay in getting labels, last-minute change in the style of the garment by the buyer, etc. These cannot come under the force majeure clause, but some exporters have managed to get relief under this clause, from certain top officials in the textiles ministry,” according to sources. Leading exporters and AEPC officials have acknowledged this fact.

According to sources, “Some exporters have seen the documents that ratify the above reasons under the force majeure clause. Exporters then asked the ministry for details about the relief given, the headings under which the relief was given to some exporters, so that others too could match their reasons under those headings. But the ministry has refused to divulge any such details, and has come down strongly on the exporters.”

According to Mr Ashok Rajani, vice president, export promotion cell, AEPC, and a leading garment exporter, “The Samadhan scheme was a good scheme, which acknowledged the problems an exporter faces while fulfilling his orders, and takes a lenient view in case of non-shipment of goods, while not letting the exporter go scot-free. Unfortunately this scheme has been struck down by the finance ministry. However, relief should be given to the exporters. Ninety-nine per cent of exporters have genuine reasons for not being able to fulfill their orders. This issue has remained unresolved for too long now.”

Says Mr Amit Goyal, president, Confederation of Indian Apparel Exporters (CIAE), “We are planning to have a meeting with key ministry officials next week, to resolve this issue. While relief has been given to some exporters, for some reason, there is no justification for depriving other genuine exporters of similar benefits. And why is the ministry and the AEPC in such a big hurry to encase the BGs, which can easily be encashed any time? The exporters have the right to know why such a drastic step has been taken.”