The Apparel Export Promotion Council (AEPC) said that the industry is deeply disappointed by the 15 percent reduction in duty drawback rates. In the Union Budget for 2010-11, there was a sharp increase in duties on most input materials and excise duty was increased by about 25 percent over last year. In addition, a fresh duty of five percent was levied on crude oil – a key input in garment production process.
“In this scenario, the industry fails to understand the rationale of reduction of duty drawback by 15 percent when duties were increased by over 25 percent and fresh additional duties were also levied on inputs,” said AEPC Chairman Premal Udani in a letter to Finance Minister Pranab Mukherjee.
“The apparel industry is deeply disappointed and feels very badly let down at the new revised drawback rates announced effective from September 20, 2010,” Udani said.
The recession for the ready-made garment sector is far from over, he added. For the first four months of the current financial year, exports declined by 8 percent over last year. The industry is reeling under unprecedented price rise of its basic materials like raw cotton, cotton yarns and fabrics.
“A contraction of exports means loss of jobs,” said the AEPC chairman. “By our estimate, over a million jobs have already been lost. More will follow if urgent corrective steps are not taken.”
Udani called for not only restoring the old drawback rates but to increasing them as much as possible. He said the textile and clothing industry is the largest employment generator in the country after agriculture.
“The government has given generous allocation to skill development initiatives in our sector. What use will this be if instead of job creation, there are job losses?”
Copies of Udani’s letter were also sent to the Secretary at the Department of Revenue Sunil Mitra, Joint Secretary for Drawbacks Najib Shah, Textile Minister Dayanidhi Maran, Textile Secretary Rita Menon and Joint Secretary V. Srinivas.
The government announced on September 17, new drawback rate for cotton garments at 7.5 percent of the FoB as against the earlier rate of 8.8 percent. For garments of blend containing cotton and man-made fibre, the new drawback rate is 8.6 percent as against the earlier rate of 9.8 percent. For garments of man-made fibre, the new drawback rate is 9.5 percent against the earlier rate of 10.5 per cent.
For ready-made garments made of silk and wool, the rates are 10 percent and 7.5 percent respectively. The new entries for garments of blend containing wool and man-made fibre and for those made of cotton with one percent or more by weight of spandex / lycra / elastane have been created with drawback rates of 8.6 percent and 8 percent respectively.
In the made-ups category, the revised drawback rate for cotton made-ups is 7.1 percent with a cap of Rs 60 per kg. The drawback rates and caps for made-ups of man-made fibre and of blend containing cotton and man-made fibre have also been reduced.