Industry & Economy
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Readymade Garments
Lower drawback duty to hit garment exporters
Anna Peter
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Many garment exporters had turned to producing niche products because they could not compete with Chinese producers in the mass production segment.
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Mumbai
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March 14
GARMENT exporters, who saw duty and DEPB rates being reduced in January, are upset because the effect of that reduction is now kicking in.
According to Mr Premal Udani, President, Clothing Manufacturers Association of India, with the end of the quota regime on January 1, foreign buyers have been demanding lower prices for their orders from Indian exporters. However, the duty drawback and DEPB reductions were announced at a time when most Indian exporters had already firmed up orders based on the old duty drawback calculations.
Raising export prices due to lowered duty drawback was likely to antagonise buyers who could even look for new business partners in other `cheaper' nations.
Foreign buyers were also looking for bargains because there were no quota costs now. With a new business cycle coming up, exporters would have to raise their prices, Mr Udani said.
Many garment exporters had turned to producing niche products because they could not compete with Chinese producers in the mass production segment. The reduced duty drawback, Mr Udani said, was penalising exporters for adding value to their products by lowering the duty drawback they were eligible to by 50-60 per cent. Earlier, the drawback rate was calculated as a percentage of the FOB price of the product, but now it is being calculated by weight. Garments are normally sold in numbers whereas the new system is based on weight. This method, according Mr Udani, had led to more than a 50 per cent fall in the drawback reimbursed.
He said that the sector might witness lower exports in a few months time and urged the government togo back to the old system of calculating drawback.
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