Interviews
Raw silk prices up 87%. Sector demands abolishing duty
13 Dec '10
6 min read
“Secondly, realizations from import duty are now negligible and currently, the government is not really earning anything by levying custom duty on raw silk. 80-90 percent import is through duty-free advance licenses which are issued against commitment of export of silk fabrics. Due to abnormally high prices of raw silk, we are in no position to export pure silk fabrics in comparison to China's cheap prices, which has resulted in India being thrown out from silk fabrics export global market.
“To correct the inverted duty structure, import duty on silk fabrics should be raised to 40 percent as demanded by Varanasi silk industry. The duty realization on this will far-far exceed the negligible duty realization through custom duty on raw silk. Further, abolition of duty on raw silk & increase in duty on silk fabrics will rejuvenate the Varanasi & Bangalore silk fabric manufacturing industries, which have now closed down and will also mean resumption of silk fabric exports.
“Another anomaly is in the inverted duty structure, whereby; there is only 21 percent custom duty on twisted raw silk against 30 percent on raw silk (Not Thrown). Cheap imports of twisted raw silk, has put an end to all units of twisting. This variance should also be corrected by abolishing custom duty on both varieties.
“Imports are made even from countries not producing raw silk, like Brazil (69 tons), Uzbekistan (82 tons), Iran (29 tons), Korea (16 tons), Vietnam (46 tons) adding up to 242 tons 2009-10, against just 75 tons in 2008-09, which I expect to further increase in coming years, if the policy is not corrected. It is only because no custom duty is levied on import of raw silk from these countries, that Chinese raw silk is repacked by these countries & exported to India.
“In 2008-9, 8,392 tons of raw silk was imported at a cost of US $380 million (Rs 17 billion). In 2009-10 however, only 7,340 tons was imported at the same import value, as prices had increased. I expect that, in 2010-11, still much less quantity will be imported by paying the same amount, because of 65-70 percent increase in prices of raw silk.
“Custom duty on raw silk, both (thrown & not thrown), should be abolished & that on silk fabrics should be raised to 40 percent as it will; give new lease of life to Varanasi & Bangalore silk industry; remove the evil of under-invoicing; put an end to issuing of fraudulent advance licensing; NHDC should immediately import 2,500 tons of raw silk duty-free and raw silk detained by customs authorities should be released immediately.
He concluded by saying, “Overall impact of all this has created a multiplier effect, resulting in overall increase in cost of production of the Varanasi silk sector and unless the Government takes corrective measures on priority basis, the world's largest cottage industry will be ruined”.
“To correct the inverted duty structure, import duty on silk fabrics should be raised to 40 percent as demanded by Varanasi silk industry. The duty realization on this will far-far exceed the negligible duty realization through custom duty on raw silk. Further, abolition of duty on raw silk & increase in duty on silk fabrics will rejuvenate the Varanasi & Bangalore silk fabric manufacturing industries, which have now closed down and will also mean resumption of silk fabric exports.
“Another anomaly is in the inverted duty structure, whereby; there is only 21 percent custom duty on twisted raw silk against 30 percent on raw silk (Not Thrown). Cheap imports of twisted raw silk, has put an end to all units of twisting. This variance should also be corrected by abolishing custom duty on both varieties.
“Imports are made even from countries not producing raw silk, like Brazil (69 tons), Uzbekistan (82 tons), Iran (29 tons), Korea (16 tons), Vietnam (46 tons) adding up to 242 tons 2009-10, against just 75 tons in 2008-09, which I expect to further increase in coming years, if the policy is not corrected. It is only because no custom duty is levied on import of raw silk from these countries, that Chinese raw silk is repacked by these countries & exported to India.
“In 2008-9, 8,392 tons of raw silk was imported at a cost of US $380 million (Rs 17 billion). In 2009-10 however, only 7,340 tons was imported at the same import value, as prices had increased. I expect that, in 2010-11, still much less quantity will be imported by paying the same amount, because of 65-70 percent increase in prices of raw silk.
“Custom duty on raw silk, both (thrown & not thrown), should be abolished & that on silk fabrics should be raised to 40 percent as it will; give new lease of life to Varanasi & Bangalore silk industry; remove the evil of under-invoicing; put an end to issuing of fraudulent advance licensing; NHDC should immediately import 2,500 tons of raw silk duty-free and raw silk detained by customs authorities should be released immediately.
He concluded by saying, “Overall impact of all this has created a multiplier effect, resulting in overall increase in cost of production of the Varanasi silk sector and unless the Government takes corrective measures on priority basis, the world's largest cottage industry will be ruined”.
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