The Hindu Business Line : SIMA deplores cut in DEPB rate on yarn

Coimbatore, Oct 12 The Southern India Mills Association (SIMA) has deplored the Centre’s decision to cut the DEPB (duty entitlement pass book) rate on yarns, including cotton yarn, adding the move has hit further the exporting textile mills already reeling under price pressures caused by the strengthening of the rupee.

The SIMA Chairman, Dr K. Srinivasan, in a statement, said recently the Union Government enhanced the DEPB rates for cotton yarn marginally from two per cent to 5 per cent. Considering the 13.5 per cent rise in the rupee value witnessed since October 2006, this relief was itself moderate.

Every percentage rise in the rupee value had eroded the textile mills’ profitability to the extent of 1.2 per cent and it was only in this background, the textile industry was all along urging the government to raise the DEPB benefits.

The Prime Minister too during the Textile Summit 2007 held last month had assured that his government would come out with appropriate schemes to boost exports. The decision now to withdraw the additional DEPB benefits given earlier is shocking, according to the SIMA chief.

Dr Srinivasan said that besides the rupee surge, the textile industry too is confronted with an 18 per cent increase in cotton prices, high power cost and transaction cost that was not refunded. Even the 2 per cent remission in interest rate for export credit announced by the government is yet to become a reality as banks are unable to implement it for want of proper communication from the authorities. In this situation, the government should restore the DEPB rate for cotton yarn as per the earlier notification.

(The Ministry of Commerce in an amendment to DEPB rate vide its notification issued on October 9, 2007 had brought down the rate for cotton yarn exports from five per cent to three per cent. Only two months ago, the Centre had enhanced the DEPB rate for cotton yarn from two per cent to five per cent).

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