The Hindu Business Line : Apparel export promotion body seeks restoration of drawback rates

THE Apparel Export Promotion Council (AEPC) has pleaded for restoration of drawback rates, which were prevailing prior to January 19, 2005 for the garment industry, even while expressing qualified praise for the Monday notification of the Revenue Department in determining rates of duty drawback for readymade garments.

In a communication to the Union Finance Minister, Mr P. Chidambaram, the AEPC Chairman, Mr A. Sakthivel, appreciated the Government's decision to express ad valorem duty drawback rates instead of weight-based drawback. He said the industry would once again gear itself for the export of value-added items.

Drawing the experience from other countries, the AEPC Chairman said China gives a drawback of 15 per cent of f.o.b. (free-on-board) value of exports and Bangladesh provides 13.5 per cent drawback. While this enabled China to capture a sizable world apparel market in the current year itself, he said India could not do so because of lower drawback rates announced on January 19, 2005.

Mr Sakthivel said that AEPC had submitted drawback rates for knits at 18.98 per cent and for woven at 16.97 per cent, whereas the Government has announced only 6 per cent for all cotton garments. He said the drawback caps, which were prescribed in the drawback schedule prevailing up to January 18, 2005 had an inbuilt mechanism for promoting value-added garments up to f.o.b. exports of $13 per piece.

The garment exporting community over the years acquired the expertise, specialised machines and worked with speciality buyers to penetrate such a delicate apparel market overseas. The revised drawback caps encourage value-added exports up to $7 per piece only. Hence, he said, the capacities especially created by the garment exporters would not be utilised fully.

Moreover, he said, exporters sending shipments to markets such as the US, European Union, Commonwealth of Independent Countries, South Africa and Latin American countries could not over-invoice due to import duties ranging between 10 and 30 per cent. There are countries in the Gulf and in the Middle East where import duties are nominal. In view of this position, the drawback caps prescribed for exports destined to the US, EU and others have practically no relevance and the drawback caps only acted as a deterrent to exports of value-added garments.

Mr Sakthivel said that till such time a decision is taken on the High Powered Committee to look into the matter of drawback rates which has recently submitted its report to the Finance Minister, the May 2, 2005 notification should provide for restoring the drawback rates and the drawback caps prevailing up to January 18, 2005.

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