Raw silk prices up 87%. Sector demands abolishing duty

13 Dec '10

6 min read

All over the world, custom duty is lower on raw material & higher on finished goods, so that cost of domestic production is lower than imported products. Then only, is it possible to compete with imported products.

Unfortunately, polices of the Government of India are contrary, when considered in the case of the silk sector. While, custom duty on raw silk is 30 percent, that on silk fabric is only 10 percent. As a result, China is exporting silk fabrics to India at a price which does not cover even the cost of raw silk consumed, even when not considering, manufacturing expenses & profit.

It is China's policy to monopolize export market of silk fabrics and with that strategy in mind; it is regularly increasing the price of raw silk, making it beyond Indian exporters to export silk fabrics and whose exports are now marginal. Chinese raw silk which was available at Rs 1750 per kg in August 2010, which is now available at over Rs 3275 per kg on December 9, up an astounding 87 percent, in a matter of four months. Raw silk booking price from China has leapfrogged to US $54 per kg on December 9 against $40 per kg in September, due to which current cost of imported raw silk stands at Rs 3260 per kg.

On the recommendations of the Union Textiles Ministry, the Department of Revenue had authorized National Handloom Development Corporation (NHDC) on August 8 to import 2,500 tons of raw silk, duty free, which NHDC has not imported till date, which is the main reason for this exorbitant rise in prices of raw silk and if they import now, they will have to pay more than $54 per kg against less than $40 per kg prevailing at that time.

There are 150,000 powerlooms & 50,000 handlooms in Varanasi district alone, engaging 250,000 weavers. On November 28, all handlooms & powerlooms went on a one day token closure and a very big rally & meeting of over 50,000 weavers & traders was held. Their firm demand was abolition of custom duty on raw silk. The moot question that arose in those present at the rally is, as to why is the government averse to abolishing custom duty on raw silk?

Speaking to fibre2fashion, Mr GK Kediya, Convener-Yarn Development Committee, Banarasi Vastra Udyog Sangh said, “The policies of the government are based on based on false presumptions & fallacies. It is wrong to suggest that, cheap Chinese yarn will affect adversely domestic raw silk producers. Domestic raw silk is no substitute for Chinese yarn because, denier (thickness) of Indian yarn is not uniform, due to bad quality of cocoons & obsolete reeling machines, so using Chinese raw silk is a must.

“The Indian produced raw silk cannot be used in raw form. Only Chinese raw silk can be used without twisting and is used totally on powerlooms in Varanasi without twisting. Cheap or costly, domestic raw silk is no substitute for Chinese raw silk & there is no competition between the two as their end uses are different.

The Indian domestic raw silk producers keep their prices in parity with the Chinese raw silk. A 65 percent increase in Chinese raw silk price has resulted in same increase in the domestic raw silk prices. Both producers of cocoon & reelers are reaping rich harvest without any increase in their cost of production, which is pure profiteering. As such it is wrong to presume that, abolition of custom duty on Chinese raw silk will adversely affect domestic producers & reelers.

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