The Indian apparel export industry, which is going through a rough patch, has urged the Finance Ministry not to reduce the proposed duty drawback from 11 per cent to around 7 per cent.
Duty drawback is paid to exporters to reimburse the taxes paid on goods during the course of production. India presently exports Rs 30,000 crore of apparel and this is expected to fall short by 10 per cent this year.
The Apparel Export Promotion Council (AEPC) in a statement today said: “We understand that the duty drawback rates for apparel are being finalised and the indications are that the finance ministry is contemplating reducing the drawback by 3-4 per cent. This will have a disastrous effect when already employment numbers are declining. This will add to the severe unemployment in the apparel sector.”
This plea from the council comes in the wake of the recent move which the Government of India is contemplating after the alleged misuse of benefits by exporters and is planning to introduce a fresh system to monitor the reimbursement of taxes in addition to reducing the duty drawback.
Arguing the case for its non-reduction, Rajendra J Hinduja, senior vice chairman, AEPC said the exporters are in a fix because of old commitments made at lower prices for supplies during the August - December period.
“As a consequence, this will be a very bad effect on the industry if any change in the duty drawback rates are made,” he said.
Reasoning further, he highlighted that cotton prices have jumped up by 20 per cent in the last two months.
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“These prices are the highest ever in the last several years. Government on the one hand wanted to ease cotton prices and allowed duty-free imports of cotton fibre. This has not helped in easing the prices which has seen a 15 per cent increase in recent times,” Hinduja said.
The apparel sector, like many, is facing a tough time mainly because of the global slowdown, power scarcity, even as cotton crops across the world has fallen and internationally cotton prices are also high.
“Our competitor Bangladesh has overtaken India by 20 per cent in their exports, and other countries like Cambodia, Vietnam and Sri Lanka are fast catching up. India should not lose their hold in the market and we sincerely appeal to the government not to contemplate any reduction in the duty drawback,” Hinduja detailed.