Resilience of garment exporters helps to tide over crisis

19 Aug '08

8 min read

Among other measures, the Central Government had advised the Central bank of the country which in turn announced interest subvention of 2% on pre and post shipment credit to garment sector for the period April 1, 2007 to December 31, 2007.

Subsequently, RBI issued a circular on 30th November 2007 informing its decision to extend additional interest subvention of 2% in pre and post shipment credit (Totally 4% including 2% already offered) thereby increasing the validity period till March 31, 2008.

Since the business scenario of garment units had not changed much in the current year, the exporters once more urged the Central Government for extension of Rupee Credit Interest Rate for one more year i.e. up to March 31, 2009, which was subsequently ratified by the Central bank by extending interest subvention for one more year from April 1, 2008 to March 31st 2009.

But the Central bank has issued an circular on August 01, 2008 directing that interest rate subvention scheme on export credit would be brought to a close with effect from September 2008.

The most apprehensive factor is the acceleration of annual rate of inflation which has crossed 12% for the first time in 13 years, and which is expected to moderate only by the end of March'09 according to the central government. This may force the Central Bank to once again raise its Repo Rate to curb inflation, which will lead to other banks increasing their interest rates and ultimately resulting in a increase of Packing Credit Rates and Term Loan Lending Rates.

The Central Government has also notified 16 taxable services and the service tax paid on these taxable services, attributable to exports even if they are not used as the Input Services, would be refunded to exporters.

The Government of India has also given extension for Technology Up-gradation Fund Scheme till the end of 11th Five Year Plan. The Ministry of Textiles, Government of India had resolved to further continue the TUF Scheme for the Textile industry with effect from November 1, 2007 up to March 31, 2012 and provided the Financial and operational parameters of the scheme in respect of loan sanctioned with effect from November 1, 2007.

The Modified TUF Scheme includes garment machinery under 5% interest reimbursements plus 10% capital subsidy Scheme and a few other specified machinery. The Scheme also continues to provide 5% interest reimbursement plus 10% capital subsidy for specified processing machinery. Investments like land, factory building, pre operative expenses and margin money for working capital will continue to get eligible for Apparel Sector.

While announcing the annual supplement 2008 to Foreign Trade Policy 2004 – 09, the Commerce Minister also announced the reduction of Customs Duty payable under EPCG Scheme from 5% to 3%, refund of terminal excise duty and CST paid to the exporters within one months of due date and of paying interest at 6% per annum for delay in refund of TED and CST to the exporters.

Tirupur Exporters Association

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