Coronavirus effect: Exporters approach RBI to extend deadline to pay dues by 6 months

The Indian Express
Dated:April 7,2020
Prabha Raghavan

Pharmaceutical exporters have approached the RBI, asking it to extend “at least” for six months their deadline to pay bankers dues of as much as $600 million, claiming the industry has taken a hit during the ongoing novel coronavirus outbreak.
The exporters fear failure to do so may lead to their businesses shutting down, leading to shortages of several crucial medicines, the chairperson of the Pharmaceuticals Export Promotion Council of India (PHARMEXCIL) told The Indian Express. “…we wish to inform you that our member companies, which are approximately 3,500 who generate value turnover of $50 billion divided equally into $25 billion each for domestic and exports… have approached us to request you to immediately consider at least an extension of six months for due payments against non-fund limits predominantly provided through Letter of Credit (LC) for making the payments to the bankers,” stated PHARMEXCIL chairman Dinesh Dua in a letter to RBI Governor Shaktikanta Das.
The industry witnessed “very serious” disruption both in manufacturing and supply chain operations, leading to a “financial setback” that has prevented “all” pharmaceutical firms to continue producing and making available pharmaceutical products in India and overseas, Dua wrote in the letter dated April 4. Although classified as essentials, the industry is “not at all” able to operate beyond “at best” 25-30 per cent of their normal operational manufacturing capacity, he added.
“The above will ultimately lead to acute shortage of lifesaving pharmaceuticals both in India and overseas, particularly in friendly countries like the US, the EU, Asia, Latin America, CIS and Japan to some extent,” he stated.
According to Dua, LCs worth up to $600 million will be due this month. However, shortages in raw material from countries like China, unpaid dues from importers and issues with obtaining no-objection certificates for firmss to export from India have left corporates unable to refurbish their accounts with bankers.
“This will result in the bankers terming these companies as NPAs. We just want that around $350 million dollars of this is extended by six months while we all try to get out of this monstrous situation,” he told The Indian Express. “The moment the banker takes away the LC limit and says the firm is dysfunctional or NPA, the firm will have no choice but to close down,” he added.

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