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G. Gurumurthy

COIMBATORE, April 2

THE Finance Ministry's move to bring down the duty drawback rate for the exporters of cotton knitwear from aggregate 12 per cent to 10 per cent has upset knitwear exporters in Tirupur.

According to sources in the Tirupur Exporters Association (TEA), the cut in the drawback rate will have far-reaching implications for promotion of knitwear exports.

The cut has come about because of the scaling down of the drawback rates in the customs duty and excise duty rate elements that go into the export production.

The revised rate has now put the drawback rate for the customs duty component at four per cent instead of five per cent, and six per cent instead of seven per cent in the case of excise duty.

The main grouse of the exporters is that the hosiery yarn they use attracts eight per cent Cenvat rate and is hence eligible for set-off.

If this is taken into account, the aggregate erosion in the drawback rate would be more than the actual two per cent reduction. In a letter to the Union Finance Minister, they have expressed dissatisfaction over the new rates stating that it has been effected even though there has been no drastic reduction either in customs or excise duty on the inputs the industry uses.

This would make the Indian knitwear exports further vulnerable in the already price-sensitive export markets.

In its letter to the Centre, the TEA said that the exporters had in fact asked for increasing the drawback rate for the hosiery items further from 12 per cent, and had provided adequate cost data to substantiate its case.

Besides the duty on yarn and chemical dyestuffs, the exporters incur huge costs in captive power generation using diesel gensets and heavy transportation costs while ferrying their finished export products to the gateway.

In this background, the cut in drawback rate would reverse the cost-competitiveness of the industry and render the transaction cost for export operation higher, the TEA President, Mr A. Sakthivel, said.

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