Garment industry faces payment crisis

The readymade garment industry is facing a huge payment defaults by bulk buyers with the prolonged economic slowdown affecting retail sales. The Clothing Manufacturers Association of India (CMAI) has expanded its arbitration committee to 15 members from four, so that it can provide representation to every sector of the industry.
In addition, a group of 80 volunteers has been formed to monitor the situation. These volunteers represent garment industrial estates and garment clusters. The Association has also called for a meeting of wholesalers, distributors, agents and retailers to discuss the issue in Mumbai on Tuesday.

CMAI President Rahul Mehta said the normal payment cycle, which was used to be between 30 and 60 days, has now extended to six to eight months, leading to a payment crisis in the garment industry. In some extreme cases, the buyers even disappeared without making payments.

Most garment manufacturers wait up to 18 months to recover their legitimate dues before moving the arbitration committee of the CMAI, he said.

The apparel industry is estimated at about Rs 2 lakh crore, including export of Rs 80,000 crore. Garment companies do not have control on their receivables as the industry is quite scattered, involving retailers, distributors and agents.

The CMAI has also started an awareness campaign to bring unity among garment manufacturers to ensure that the payment system is streamlined.

Rajesh Masand, Vice President and Chairman of the Arbitration and Payment Default Committee of the CMAI, said that in the case of any payment complaints, the Association would call both parties and try to settle the matter amicably. If that fails, the CMAI will inform the defaulters´ details to 80 volunteers from different industrial clusters.