Mumbai, Jan. 24: Textile companies are fast shifting production base to Bangladesh to take advantage of lower production cost it provides.
The process has already begun with units in West Bengal finding it easier to relocate to the neighbouring country. Recently, the Indian Government decided to allow duty-free import of 48 textile items from Bangladesh.
Mr A. Sakthivel, the newly-elected Chairman of Apparel Export Promotion Council, said some of the textile companies, especially from Kolkata, have already started setting up units in Bangladesh to take advantage of duty concessions, cheap labour and other low overhead costs.
“Overall, it will be at least 20 per cent cheaper to import duty-free from Bangladesh and sell it in India. Besides, textile exports from that country also enjoy certain concessions in developed countries,” he said.
Bangladesh commands a major advantage with minimum labour wage of just Rs 1,700, while it is Rs 5,000 in India.
INVESTMENT IN BANGLADESH
Indian companies have invested about $600 million (about Rs 3,000 crore) this fiscal in Bangladesh and investments are expected to go up substantially with the textile companies showing renewed interest, said an analyst.
India's imports from Bangladesh have shot up 85 per cent to nearly $300 million during April-September 2011, according to the Indian Government data.
Raw jute imports from Bangladesh in first six months of this fiscal rose over five times to $54 million, while that of readymade garment jumped nearly three-fold to $22 million. Import of made-up of textiles also increased to $27 million following tariff concessions as well as duty-free import quotas to Bangladesh to boost trade ties.
RUPEE IMPACT
On the Budget expectations, Mr Sakthivel said the Council is in the process of listing out its demand and it will take up issue of 10 per cent excise duty levied on branded garments and stress the need for some sort concession on interest rate.
The profit margins of textile companies have shrunk due to the new excise duty and high interest rates on the back of slowing demand. Mr Sakthivel said rupee has depreciated from Rs 45.30 in January 2011 to about Rs 50.70.
Source : thehindubusinessline.com