Silk fabric sector requests Govt to correct duty anomaly

02 Dec '09

5 min read

Recently the Banarasi Vastra Udyog Sangh (BVUS) dispatched a letter to the Union Finance Minister and the Union Industry Minister, highlighting the plight of the silk industry in Varanasi in particular and India as a whole. They particularly dwelt on the customs duty and anti-dumping duty imposed on imports of raw silk and silk fabrics in to the country, which they consider as against the economic principles.

They have termed the duty structure on imports of raw silk and silk fabrics as inverted. Giving an example, the letter states that all over the world, countries impose lower import duty on raw material (raw silk in this case), so that cost of the fabrics manufactured domestically is lower and competitive. For the same reason, import duty on finished products (silk fabrics in this case) is kept higher, so that imported finished products prove costlier in comparison to domestically produced goods.

But in the case of India, while basic import duty on raw silk is 30 percent, on silk fabrics it is only 10 percent as a result of which silk fabrics are dumped at abnormally low rates by Chinese silk fabric exporters, which has led to closure of a large number of handlooms and powerlooms in the country and these workers have been forced in to penury. It adds by saying that, at present the situation is such that silk fabrics are being imported at a price, which does not cover even the cost of raw materials consumed, while not speaking of other expenses and profits.

In the light of the above, they have stated that it is not possible to run a silk fabric unit profitably under the present duty structure and have urged the honorable ministers to bring down the import duty on raw silk to zero and that on silk fabrics be raised to 40 percent. Moreover, they have suggested that raw silk be brought out of special category & put into general category, if the exemption is not possible.

Another pertinent issue that they raised is that of anti-dumping duty on silk fabrics. An anti-dumping duty was imposed on silk fabrics in April 2006 which is practically of no use. Citing the example of Crape Silk 60 Gms and as per the notification, no anti-dumping duty is applicable if the price is above US $2.65 per metre. But, since a majority of the imports are below that level, it is more of a fallacy, than a fact, as such, it is not only very much inadequate, but also ineffective, states the Sangh.

The other issue which they have raised is the imposition of anti-dumping duty on imports of raw silk. Despite, vehement opposition of consumers of raw silk, represented among others by Banarasi Vastra Udyog Sangh, Varanasi and Silk Traders Association, Varanasi, anti-dumping duty was imposed on the plea of protecting the domestic sericulture raw silk sector, but which proved to be detrimental for the silk weaving industry and which the Sangh considers to be another fallacy on the part of the government.

The letter goes on to state that there is a huge gap between demand which stands at 28,000 tons, while production is only 18,000 tons, leaving a wide gap of 10,000 tons. Secondly, raw silk of superior Bi-Voltine quality which can be used without twisting is not produced in India and its import is a must for production of fabrics like Organza, Supernet, Chanderi etc, so since the end-use of imported & domestic raw silk are different, imports will not affect domestic sericulture.

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