The Hindu : Tamil Nadu News : `Duty rate reduction will tell on textile exports'

Online edition of India's National Newspaper
Wednesday, Sep 29, 2004

Tamil Nadu

Tamil Nadu

`Duty rate reduction will tell on textile exports'

By L. Renganathan

NAMAKKAL, SEPT. 28. The reduction in Duty Entitlement Pass Book (DEPB) rates from 11 to 6.1 per cent has shocked textile exporters who fear that the move will cause "unimaginable loss'' and "lead to shrinking of exports''.

The DEPB system was introduced to reimburse to promoters a portion of the duties and levies they incurred during manufacture and export of textile items. It enabled exporters to quote competitive prices.

Piquant situation

"To our shock and disbelief, the DEPB rates have been reduced by 45-50 per cent. The slashing of the rates from 11 to 6.1 per cent has placed us in a piquant situation. Execution of the contracts already entered into would lead to losses and we could not raise the price as it was fixed against stiff global competition'', says the national Chairman, Handloom Export Promotion Council, M. Sivakannan.

With the reduced rates, the exporters see difficulty in getting increased business, as the buyers will not warm up to the idea of increased prices. The move will especially affect the textile exporters based in the region, and ultimately result in shrinking of exports.

The reduction will also hit the sectors of ginning, spinning, preparatory works, weaving, processing and garmenting, points out M.S. Mathivanan, national president, Textile Association.

The exporters argue that the present prices quoted have no great leverage and the slash in the rates was at cross-purposes with the avowed strategy of promoting exports set out in the recently-unveiled foreign trade policy. They also point out that the Finance Minister emphasised in his budget speech that their concerns would be addressed through duty drawback or DEPB. But, the slashing of the benefits runs contrary to the Minister's speech, they say.

"When we are gearing ourselves to face challenges in the post-multifibre regime and incurred heavy capital expenditure in total quality management to meet the buyers' demands, the slashing of the DEPB benefits will only result in huge losses to us,'' Mr. Sivakannan says.

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