India wants EU to do away with import duty on its textiles.

NEW DELHI: India has asked European countries to waive import duty on its textiles, arguing that the quality of its cloth is better than that supplied by Pakistan and Bangladesh, yet Indian textile makers have to cough up nearly 10% in import duties while imports from its two neighbours are duty-free.

The government has told several European countries in recent discussions that their "skewed" textile import policies have made Indian textiles unfavourable for European customers.

"Germany has given zero duty to Pakistan, whereas they are levying 9.6% on us, affecting our exports," Union textiles minister Kavuru Sambasiva Rao told ET. "So, we are in talks to give us the same facility that they are giving to Pakistan."

Rao said the government has already raised the issue with Germany and the UK.

The 28-member European Union withdrew the generalised system of preferences (GSP) for India in December 2013 while continuing with the "GSP-plus" status for Pakistan and other least developed countries (LDC).

Most European countries do not make textiles as it is expensive, Rao pointed out, adding that 95% of their textiles requirement is met through imports.

The GSP-plus status allows Pakistan to export 20% of its goods with zero tariff while 70% have a preferential rate policy to help the country recover from the economic effects of the 2010 and 2011 floods. India's main competitor, Bangladesh, also enjoys GSP benefits under the LDC quota. "Due to political reasons they have given facilities to Pakistan and Bangladesh, and we want them to give it to us also," Rao said.

The government is also considering to provide export incentives to textile companies exporting to EU countries.

About 30% of India's textile exports go to the EU, with Germany and the UK accounting for the largest share.

"We are thinking if government would provide some relief in form of 3-4% export credit, which will help them compete in the international market better and exports can go up," Rao said.

Rao has already written to the Centre to provide 5% duty drawbacks to the textiles industry after GSP benefits were withdrawn.

"We are vehemently opposed to the idea of granting GSP-plus to Pakistan, more so if comparatively India is kept out of it," said Virender Uppal, chairman of Apparel Export Promotion Council (AEPC).

India's textiles sector recorded 16.8% growth in the first eight months of the current fiscal to $19.2 billion. Exports picked up as markets in the US and the EU recovered in the second quarter of the fiscal.

Industry players, however, point out that though it may be difficult for these countries to bilaterally pass on zero duty incentives, an EU free-trade agreement under negotiation since 2007 will prove to be beneficial for the sector.

AEPC has also written to the government on the possibility of concluding only the textiles free trade agreement with the EU, if there are hindrances related to the auto sector.

The textiles ministry is looking at a $60-billion export target for next fiscal, against over $41 billion likely to be achieved this year.

The government is keen to maintain the pace of overall export growth to attain the target of $325 billion in 2013-14 and is discussing incentives for sectors most likely to be affected after withdrawal of GSP benefits such as chemicals, pharmaceuticals and textiles.

Source : economictimes.indiatimes.com