5% duty drawback cut cripples export industry.

Ludhiana: Apparel exporters are feeling the heat of five percent reduction of duty drawback on exports from October 1. Exporters in the city are incurring losses on old orders on which rates were finalised before reduction in drawback.

Exporters said they were forced to hike prices due to increased cost of production ever since the Union government shelved incentive from 7.7% to 2%. Businessmen asked the government to reconsider the duty drawback cut, failing which, they said, garment exports would take a severe hit. 

Harish Dua, president, Knitwear and Apparel Exporters Organisation, said, "Ever since the duty drawback has been reduced to 2% the garment export business has nosedived. We are running losses on orders booked on old rates before the duty drawback was reduced. Apart from this, we are not getting fresh orders as we have been forced to hike prices because our cost has risen after the duty drawback cut of 5%."

Dua also said apparel export would not fall back on track if the drawback cut was not rolled back as many exporters were dependant on this incentive. According to Dinesh Kalra, president, Ludhiana Business Forums, duty drawback of 7.7% was a huge support for garment exporters operating on a very thin margin. Five percent is a massive cut and is taking a toll. He said apparel export has slowed down and will eventually hit a new low if the rate is not hiked back to 7.7% or a decent level.