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Reduction in duty drawback may affect exports of synthetic textiles
Sep '08
The recent announcement of Government, reducing duty drawback rates across the board for all synthetic textile products has sent shock waves among exporters. The reduction, in some cases as high as from 17% to 2.6%, will have serious repercussions and will derail export activity and affect achievement of target fixed for exports, said Shri Sanjeev Saran, Chairman, Synthetic & Rayon Textiles Export Promotion Council (SRTEPC).

"At Stake is exports of synthetic textiles valued over Rs.12,000 crores from the country", he added. The Chairman said that the worst affected are the exporters of Synthetic Filament and Spun Yarn as well as Fibres where the drawback rates have been severely cut. Shri Saran pointed that Synthetic Yarns and Fibres accounted for 42% of the total Synthetic textile exports last year amounting to 5300 crores and showing a growth of 11%.

This sector despite many hurdles has been growing due to the efforts of exporters and is poised to reach a respectable level of Rs 6500 crores in the current year, he said. All this will be jeoparidised due to the steep reduction of Duty Drawback rates, the Chairman pointed out.

Duty Drawback plays an important role in maintaining the competitiveness of export products as it neutralises the incidence of the Customs and Excise Duties on those. The exporters who are already under tremendous pressure due to increased competition overseas, fluctuating currency, rising raw materials costs etc. were therefore taken aback by the unexpected sharp reductions in drawback rates.

In addition, it is also important to note the main competitor to Indian textile exports i.e. China has increased the subsidies from 9% to 13% across for all the man-made fibre textile items from 1st August 2008, thus leaving Indian exporters at dire straits. Yet another setback on exports came when the Government decided recently to discontinue the interest subvention on export finance from 1st October 2008 against the earlier decision to provide it till 31st March 2009 adding to the burden on exporters.

According to SRTEPC Chairman, there was no change in the Central Excise duty announced in the Union Budget 2008-09 on Manmade fibres and Filament yarn which constitutes a major portion of the export products and hence there is no justification for any reduction in the Duty Drawback rates for Synthetic textile items.

Shri Saran also expressed his surprise that in the case of some of the export products like Synthetic /Artificial Fibres/Filament Yarn only the Customs portion of the Drawback rates have been prescribed which is unusual. This, according to him would create problems for the exporters especially the merchant exporters.

Exporters of Synthetic textiles are also finding it hard to get an increase in the export prices in the international markets due to economic slowdown in the major markets. The new Drawback rates will therefore, further aggravate the situation for them. “The reduction in the Drawback rates will certainly lead to a sharp decline in exports of Synthetic textiles unless the Government immediately reviews the rates and enhance those suitably to sustain exports said Shri Saran.

In this context, the Chairman pointed out that majority of the exporters work today under the Duty Drawback route as it is found to be easy to operate. The SRTEPC is making detailed representations to the Ministry of Finance as well as to Ministry of Commerce and Ministry of Textiles, Government of India, he added. He urged the Government to come to the rescue of Synthetic textile exporters before the slide down begins.

The Synthetic and Rayon Textile Export Promotion Council

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