Tirupur feels the continued depreciation of the rupee will have a cascading effect on logistic costs. The apprehension is that unless steps are taken to arrest the free fall, oil companies might think of increasing domestic fuel prices once the under-recoveries (the difference between the retail selling price and the import price) go up.

Any fuel price hike can be catastrophic for a cluster such as Tirupur as the entire production cost goes up as trucks and other cargo operators will increase transportation charges. Since orders are taken months in advance, manufacturers cannot pass on the increase to buyers as they may lose orders. The production chain is scattered in Tirupur, movement of goods from one processing point to another becomes costlier which, in turn, shrinks profit margins at the cluster level itself. Adding to that, moving finished goods from the cluster to sea ports as well as to points within the country will increase costs multi-fold.

The depreciating rupee is worrying exporters too even though they get a better unit value for their products in export markets. This is because much of the machinery and embellishments used to give value addition to apparels are imported.