Proposed duty drawback cut will devastate us - apparel exporters

04 Aug '08

2 min read

The proposed cut in duty draw back from 11 to 7 percent, which the Government is still mulling over, has met with severe criticisms from the Indian apparel export industry. A plea has been made by the apparel sector urging the Finance Ministry to block any further developments in this policy which is bound to bring devastating consequences across the country.

Duty drawback is essentially reimbursement to exporters of taxes paid on goods during the course of production. However, the situation is already getting grim as Rs300,000 million fetched by the apparel sector is expected to fall by 10 percent this year.

Apparel Export Promotion Council (AEPC) vehemently protested against accepting a cut in duty drawback on grounds that slashing 3 to 4 percent will have a fatal impact on the employment number of the apparel sector which is, even now, declining at an uncontrollable rate.

However, Government has taken this stance and counteracted on this issue in light of the fact that exporters have been misusing benefits granted by the center. It is therefore, keen on introducing an entirely new system to monitor the reimbursement of taxes in addition to reducing the duty drawback.

But, exporters who have already made commitments to clients at lower prices during August – December period and are finding themselves in a fix. Additionally, hike in cotton prices which have mounted by almost 20 percent in the last two months, have also left the industry grappling for respite.

Although, the Government did try easing inflationary pressure by allowing duty-free imports of cotton fibre, it has failed to pull down prices which soared by around 15 percent.

Even experts are of the opinion that if India is to stand firm in competition to Bangladesh, Cambodia, Vietnam, and Sri Lanka, it cannot afford to lose its market, which is quite likely if the duty drawback is reduced.

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