cancellation of orders

Context: About 15 million people face job losses in India’s exports’ sector following cancellation of over half of the orders and a gloomy forecast for global trade due to the COVID-19 pandemic as per exporters’ body FIEO.
Key Points

• Federation of Indian Export Organisations (FIEO) has stated that many of the exporting units have had a cancellation of over 50% of the pre-existing orders due to their inability to deliver on time owing to the national lockdown in place and also due to the reduced demand conditions in the importing countries.
• The export units are left with very few existing orders.
• Given the global outbreak of the COVID-19, the forecast for global trade also does not seem promising for the export based industries.
• China’s reopening and resuming of factory operations post the lockdown has resulted in many orders going to China due to which India is losing market to China.

Challenges

• There are concerns that the continued closure of factories will result in heavy losses and bring them to the brink of closure as they were burdened with fixed costs which in any case have to be absorbed by the factories.
• The exporter’s body of FIEO estimates that about 15 million people may face job losses in India’s exports’ sector owing to reduced business opportunities.
• The bankruptcy of these units might also lead to an increase in NPAs (Non-Performing Assets) among exporting units, thus affecting the whole economy.

Suggestions given by FIEO

• It has sought immediate announcement of a relief package for the export sector.
• It has called for a balance between life and livelihood and is in favour of reopening of the factories with a minimum number of workers to ensure that the pre-existing orders are met.

About Federation of Indian Export Organisations (FIEO) 

• It was established in 1965 with headquarters in New Delhi. It was formed by Union Ministry of Commerce and private trade and industry. 
• It is an apex body of exports promotion council, commodity boards and export development authorities in India. 
• Its direct members contribute more than 70% of India’s exports
• Function: Providing crucial interface between international trading community of India and Centre and state government, railways, ports, surface transport, financial institutions and all other engaged in trade facilitation.