SEZ clothing exporters in Catch-22 situation

30 Jun '10

1 min read

Growing demand for eco-friendly and sustainable clothing from their overseas buyers and top retail brands from developed countries has put pressure on garment manufacturing units in the Special Economic Zones (SEZs) in the country.

These retail brands which are seriously working towards providing an eco-friendly garment to their consumers are insisting that their local Indian partners source as much raw materials as possible from local markets in order to reduce the carbon footprint.

This requirement has put the units in the SEZs in a Catch-22 situation, since most of the garment production units in the SEZs are importing their raw material requirements to avail of duty-free imports benefits available to units in these tax havens.

If they were to buy these raw materials from the domestic markets, they would have to shell out the local duties and taxes and would not be able to claim duty-drawbacks and other schemes available to exporters outside the SEZs.

This in turn would reduce their competitiveness and if more apparel retail brands insist on the terms and conditions relating to reducing the carbon footprint, these companies located now in the SEZs, could consider moving out of these tax havens.

Fibre2fashion News Desk - India

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