Textiles ministry seeks 2% hike in duty drawback

Tag : Silk Yarn

The textiles ministry has moved a Cabinet note advocating 2%increase in duty drawback to the textiles sector.
Although such incentives would breach World Trade Organisation(WTO) norms, they will help protect the sectors competitiveness inthe global market the ministry argues.
The ministry had earlier approached the finance ministry tofacilitate a higher refund. However, the finance ministry rejectedthe demand and trimmed the incentives on a few products used as rawmaterials.
Following this, the textiles ministry moved the Cabinet note latelast month. Duty drawback moderates the affect of customs duty,central excise duty and service tax paid on exported items.
The duty drawback is prerogative of the finance ministry and ithas decided to reduce the rate. We differ. There is a forum todiscuss such issues. We have already sent a note asking forcomments from various ministries, a top official in the textilesministry said on the condition of anonymity.
It is pertinent to note that subsidies were the main reason for thefailure of discussions between developing and developed members ofWTO. The United States provides $4 billion in subsidy to around20,000 cotton farmers. This in turn impacts the livelihood ofpeasants in African countries, which have been demanding thereduction in the assistance by the US. The US, however, has beenavoiding any further discussions on the issue.
We are aware that such incentives are non-WTO compliant but araise in duty drawback is essential as input costs have increased.Also, the competitiveness in the global market would fall as Chinaand Pakistan have enhanced assistance to their respective sectors,the official said.
Earlier this year, China and Pakistan extended various sops to theindustry to push textiles export. China enhanced the VAT refundrate on synthetic from 9% to 13% and on cotton from 11% to 13% witheffect from August.
At the same time, Pakistan introduced a scheme to facilitate 5%refund of interest on investment in machinery and 3% interestsubvention on credit to meet working capital requirement. It alsostarted providing R&D assistance at 6% to garment exporters.
In India, the finance ministry cut duty drawback rates for higherquality silk fabric, wool tops, woollen yarn, grey cotton yarn anda few other items as rupee depreciated more than 10% in thecurrency market this fiscal, increasing export realisation.
The industry feels the reduction in the incentives would lead tofall in textile exports....