Import duty exemption will help us compete better, say garment exporters.

New Delhi, September 9: Ready-made garment exporters are hopeful that the government’s decision to exempt import duty on speciality man-made fabric used as inputs for exports can help them compete better with smaller countries such as Bangladesh and Vietnam that have the dual advantage of low operating costs and preferential access to markets such as the European Union.

The Apparel Export Promotion Council is organising a nation-wide drive to spread awareness about the new special advance authorisation scheme announced by the Centre last month, so that all exporters can take advantage of it, Ashok Rajani, Chairman, AEPC, told BusinessLine.

“India has been losing to competition from smaller nations like Bangladesh and Vietnam because of higher labour cost, absence of cluster manufacturing and inability to attract women workforce to reduce labour costs. Banking on trade agreements and low manufacturing overheads, these countries have started to pose a serious threat, especially in the EU and the US,” said Rajani.

According to industry figures, India’s ready-made garments exports in 2015-16 were worth $17.1 billion, Bangladesh’s garments exports in 2015-16, were valued at $28 billion.

The government’s decision to allow duty-free import of speciality man-made fabric (which will add up to an additional duty drawback reimbursement of 3.2 per cent to 4.7 per cent) will help immensely in increasing Indian exporters’ competitive edge, Rajani added.

“The additional benefit to exporters of high-end garments that use speciality fabric could roughly help to offset about 2-3 per cent import duties in the Western markets,” pointed out Ajay Sahai from the Federation of Indian Export Organisations (FIEO).

Given the fact that garment exporters from India pay on an average an import duty of five per cent in the EU when countries such as Bangladesh pay zero duty, the additional reimbursement in the form of the special advance authorisation will help to bridge the gap. In the US, the import duty on garments range from nine per cent to 20 per cent.

Since duty free import is allowed only of speciality fabric and not all man-made fabric, it is not expected to hit the domestic industry, pointed out Sahai. “The Textile Ministry and the Directorate General of Foreign Trade have framed the scheme on the premise that it would make speciality fabric, which is imported and not produced in the country, cheaper. If it turns out that it is affecting some domestic manufacturers, they have to be provided a level-playing field,” he added.

Source : thehindubusinessline.com