The Hindu Business Line : `Major deterrent to value-added exports'

THE Apparel Export Promotion Council (AEPC) has expressed dismay over the drastic reduction in the duty drawback rates, terming it as a major deterrent to value-added exports from the country.

In a communication to the Union Finance Minister Mr P. Chidambaram, the AEPC Chairman, Mr A. Sakthivel, said the duty drawback rates have been slashed almost by 50 to 60 per cent in general.

The new rates do not distinguish between various counts, finishes, trimmings and embellishments, use of lining and interlining material, embroidery and other thread works, which are already suffering from central excise/customs duty.

When contacted, Mr Sakthivel told Business Line that as a result of the steep cuts in drawback rates, the `on-hand' export order worth Rs 5,000 crore would witness an immediate erosion of Rs 300 crore to exporters as they had already factored in the old drawback rates.

He said that at a time when he has been persisting with the Ministry to provide stable policy regime in duty drawback rates so that exporters could give proper prices to their buyers, the Revenue Department has struck a decisive blow, jeopardising the export competitiveness of high-value product exports.

The new rates do not distinguish incidence of duty due to garments, which are subject to special washes like enzyme wash, where the chemical costs are very high and the actual duty suffered is almost double from the normal garment.

The new rates do not take into account incidence of other levies such as service tax, excise duty on diesel, furnace oil, consumables, electricity tariffs, octroi and transaction cost.

What is more worrisome, the Council said, is that the new rates would be subject to different interpretations by the port customs officials, since the rates are linked by weight, giving rise to undue harassment and result in `inspector raj'.

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