Staff Reporter | 01 Aug, 2008
The Indian apparel export industry has urged the Finance Ministry not to reduce the proposed Duty Drawback from 11 percent to around 7 percent.

Duty drawback is paid to exporters to reimburse the taxes paid on goods during the course of production. India currently exports Rs 30,000 crore of apparel and this is expected to fall short by 10 percent during the current year.

The Apparel Export Promotion Council (AEPC) in a statement said: "We understand that the Duty Drawback rates for apparel are being finalised and the indications are there that the Finance Ministry is contemplating to reduce the drawback by 3 to 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 this Council comes in the wake of the recent move which the Government of India 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 non-reduction, Rajendra J Hinduja, senior vice chairman, AEPC said that the exporters are in a fix because of old commitments made at lower prices for supplies during August-December period.

"As a consequence there 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 percent in the last 2 months.

"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 to ease the prices which has seen a 15 percent increase in recent times," Hinduja said.

The apparel sector, like many, is facing a tough time mainly because of - global slowdown, power scarcity, even as cotton crops all over the world has reduced and internationally cotton prices are also high.

"Our competitors Bangladesh has overtaken India by 20 percent in their exports and the other countries like Cambodia, Vietnam and Sri Lanka are fast catching up. India should not loose their hold in the market and we sincerely appeal to the Government not to contemplate any reduction in the Duty Drawback," Hinduja detailed.