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Industry split over duty sops on cotton exports
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SME Times News Bureau | 04 May, 2010
The textile industry has divided over the government's decision to withdraw the Duty Drawback on exports of cotton yarn with different industry bodies recently giving chalk and cheese views on the issue.
The Tirupur Exporters' Association has recently viewed that the government's decision to withdraw the duty drawback on exports of cotton yarn will ultimately trigger for the reduction of cotton yarn prices.
In a statement, TEA President A.Sakthivel thanked the Textile Ministry for its continuous efforts with various measures for reduction of the cotton yarn prices in the domestic market. He pointed out that in the amendments made in the Finance Bill 2010 and with all the measures taken so far, the cotton yarn prices may come down by Rs.15/- per Kg.
The government had withdrawn the duty drawback on exports of cotton yarn last Thursday, increasing the statutory export duty on Raw Cotton to Rs.10,000/- per Metric tonne, while maintaining the effective rate of Rs.2,500/- per Metric tonne at the current level.
By this enhancement, according to TEA, the government could increase the export duty on cotton yarn up to Rs.10,000/- per Metric Tonne whenever need arises.
The Northern India Textile Mills Association (NITMA), on the other hand, in a press statement, stated the government's decision to withdraw duty drawback for cotton yarn is very unfortunate and unfair.
NITMA viewed that the move is also inequitable as all other export products are eligible for the refund of duties and the sudden withdrawal will have long term implications for the healthy development of the sector in future.
The government had earlier withdrawn 7.67 percent DEBP on cotton yarn and now suddenly withdrawn duty drawback, the intention of the Government is not understandable as drawback is not an incentive and it is only refund of duties, which is given for all the commodities with an objective of not exporting duties and creating a level playing field in the international market, NITMA President Ashish Bagrodia said.
He pointed out that the government is itself questioning the rationale of its scheme by making the duty drawback rate as nil which was recommended by the High Powered Committee after thoroughly verifying all the incidence of duties suffered by the spinning sector on its inputs.
Instead of giving additional benefits to the ailing/weak sectors, the move of the government is penalizing the spinning sector and it will be counterproductive and would totally discourage any further investment into this sector paralyzing the entire textile value chain, the NITMA President cautioned.
Texprocil, an international marketing organization, also termed the recent move by the government as a severe blow to export trade.
In a statement, Texprocil said that withdrawal of Duty Drawback rates on cotton yarn is also highly discriminatory as all other export products are eligible for the refunds.
"Further it is not an export subsidy contingent in law or in fact upon export performance. The WTO Agreement on Subsidies and Countervailing Measures (ASCM) clearly permits exemption or remission of prior stage cumulative indirect taxes or import charges levied on inputs that are consumed in the production of the export product," added Texprocil Chairman V.S.Velayutham.
Withdrawal of the scheme was unfortunate with long term implications for the healthy development of the Indian textile industry, Texprocil viewed.
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