Since its inception in 1958, the Sports Goods Export Promotion Council (SGEPC) has been relentlessly promoting exports of sports goods and toys from India. In an exclusive interaction with The Dollar Business, Raghunath Singh Rana, Chairman of SGEPC, talks about the Council’s journey so far,
and explains challenges faced by the Indian sports goods exporters.

Aamir H. Kaki | November 2016 Issue | The Dollar Business

TDB: This is Sports Goods Export Promotion Council’s (SGEPC) 58th fiscal year. How has the journey been so far? How successful has the Council been in achieving its objective to promote exports of sports goods and toys from the country?

Raghunath Singh Rana (RSR): SGEPC was founded in 1958 and the journey so far has been really good and a successful one! The Council’s main role is to help the sports goods and toys industry find new markets, products, technologies and raw materials, by arranging members’ participation in overseas exhibitions, fairs, buyer-seller meets, as well as conduct market surveys under various government schemes, including MDA (Market Development Assistance) and MAI (Market Access Initiative) schemes. Apart from these, the Council has been helping the industry and its members by organising various seminars and events to create awareness about export schemes, testing of products (as per export standards), facilitating patenting of products, designs, etc., which have helped our exporters in a big way. The Council has also played a big role as a single platform for exporters to find solutions to their many problems.  

TDB: What challenges do Indian sports goods exporters face while competing with their global counterparts?

RSR: Lack of advanced technology in manufacturing and packaging of a product is the most crucial challenge. Other hassles the industry faces are non-availability of proper raw materials and restrictions on free movement of indigenous raw materials from one state to another, such as rubber from Kerala, Kashmir willow wood from Jammu & Kashmir, cane from Assam, etc. In addition, high raw material prices and frequent fluctuation of Indian currency become a problem for exporters. We also face challenges like high cost of transporting containers from Jalandhar and Meerut to Mumbai seaport, shortage of skilled labour, arcane labour laws, high cost of land for industry, poor road infrastructure in many places, corruption at every step, and finally a lack of development of new products and games.

TDB: Can you elaborate on the financing mechanism of SGEPC? Is financial aid from the government sufficient to execute all activities?

RSR: I think, as of now, the financial aid from the government is sufficient enough to carry out all of Council’s activities. But when it comes to some specific activities involving product development, the sports goods industry does need a research and development (R&D) centre in Jalandhar, which should be fully funded by the central government. Having said that, the management, maintenance and operations of the Centre has to be handed over to a committee consisting of industry representatives.

TDB: Are you satisfied with the government incentives that are being provided to the exporters of sports goods? What more do you think the government should do to boost exports?

RSR: At the moment, the only incentive available to the exporter is a 5% duty benefit under Merchandise Exports from India Scheme (MEIS). The earlier policy, which no longer exists, was very helpful as it offered a 7% incentive under Focus Product Scheme.
It was a policy that was specifically planned, considering the fact that this is a labour-oriented industry and generates huge employment. Therefore, the incentive under MEIS needs to be reconsidered and increased to 7%. In addition, export finances from banks need to be available at a lower interest rate.  

TDB: Do you think India is being really promoted as a reliable source of goods across international markets? How difficult is it to get support from the government when it comes to trade promotion activities?

RSR: I would say, brand India is being promoted well enough to encourage other countries to come to India, to manufacture goods in India or source from India. In the last couple of years, due to our Prime Minister Narendra Modi’s overseas visits, coupled with the policies of the current government to build strong confidence among foreign countries and multinational companies, brand India has been promoted even further.
But having said that, more can be done through export promotion Councils (EPCs) to promote Indian brands. For instance, when exporters go for overseas exhibitions and trade fairs, it may be a good idea to have specific activities, events or competitions, during the fairs under the banner of ‘Brand India’ or ‘Make in India’ and these activities should be funded by the government.

TDB: What percentage of the industry’s revenue come from exports? And how do you see the industry evolving in the near future?

RSR: The current exports share is roughly 50% – sports shoes and sports apparel are not included in this number. Although this is a significant figure, exports can be increased through various ways, including product diversification, developing new products, exploring new markets, adapting to new technology, developing innovative concepts of marketing and by competing on prices, which is not possible without support from the government.
Our’s is not a big industry by volume, but it is a huge cottage industry, employing large number of people from economically and socially very weak sections of the society.    

TDB: How aware is the MSME community about SGEPC?

RSR: Awareness about SGEPC is pretty high among MSMEs. A big membership number is a testimony to the Council’s growing popularity among small and medium enterprises engaged in sports goods manufacturing across India. In fact, you will find that there are SGEPC members who do not export but still attend the meetings, seminars and events, organised by SGEPC at regular intervals.

TDB: What impact will Goods and Services Tax (GST) have on the sports goods industry? Do you see exports getting a boost?

RSR: The concept of Goods & Services Tax (GST) is very good and will streamline the country’s current complex tax structure. But, it will create trouble for exporters, especially, for exporters of sports goods. Exporters will have to first pay GST and then claim the refund, which at the moment, in case of VAT, takes more than two years.

Currently VAT on sports goods is 6% and hence a lot of working capital of exporters remain tied in government departments for a long time. And since the GST rate would be much higher, say between 12-20%, which means more working capital of the exporters will get blocked in the refund process.
This will severely impact their business. Therefore, in case of sports goods, the minimum possible rate of GST needs to be fixed. Secondly, the refund should be released within a month after the application is submitted.