India to remove 'undue' export subsidies to textile industry.

NEW DELHI: The US, EU, Japan and Turkey are pushing India for dismantling its 'undue' export subsidies to the textile industry, but New Delhi is keen on further talks to temper the phase-out and to ensure that the key export sector is not stripped of all support.

"Yes, we indeed will have to take away some export subsidies given to textile industry in three years as the threshold level for qualifying for such sops has been breached. But, the country will be careful to ensure that it takes away only what necessarily has to be taken away," a senior commerce department official told ET.

The subsidies and countervailing measures agreement of the World Trade Organization (WTO) allows countries with per capita income below $1,000 to give export subsidies as long as exports from a particular sector is lower than 3.25% of world trade. India's share in the global market for textiles is almost 4% and has been higher than the threshold level for five years.

Since countries are given eight years to remove the subsidies, India has time till 2015 to do so.

"The government needs to carefully negotiate what kind of subsidies need to go as the textile sector gets a number of subsidies that are not directly targeted at it, but is given to all industry in general," points out DK Nair, secretary general, Confederation of Indian Textile Industries.

India's exports of textiles, including readymade garments, is said to be between $31 billion and $32 billion, as per estimates made by CITI. It accounts for around 14% of industrial production and more than 10% of the country's total exports. The sector employs around 35 million people and is the largest employer after agriculture.

The Indian textiles sector is beneficiary of a host of export promotion schemes, such as the export-oriented units and special economic zones schemes, the export promotion capital goods scheme and promotional measures like the focus product and focus market schemes.

Apart from these, there are duty neutralisation plans, like duty drawback and advance licensing schemes.

Source : economictimes.indiatimes.com