The Hindu Business Line : Cotton textile exporters seek relief in Budget

New Delhi, June 27 Stung by the steep 23 per cent decline in the export of cotton textiles, raw cotton, waste cotton, cotton yarn, fabrics and made-ups, the Cotton Textile Export Promotion Council (Texprocil) has sought policy support from the Budget to restore viability of export efforts.

Official sources told Business Line that India’s cotton textile exports, which jumped from $3,544 million in the year 2004-05 to $4,600 million in 2005-06, clocking a relatively robust growth of close to 30 per cent, did maintain a 23 per cent growth in 2007-08 over 2006-07. However, the trend turned negative in subsequent months and for the first eleven months of 2008-09 (April to February) the figure was $4,423 million compared to $5,732 million in the corresponding months of 2007-08 — a whopping 23 per cent drop that has raised concerns over the emerging export scenario.

What is worrisome is that the import figures from India’s major markets such as the European Union (EU) and the United States for the last quarter of fiscal 2008-09 (January to March 2009) reveal that India’s exports of cotton textiles to the EU plummeted by 17 per cent to $388.26 million, against $ 467.65 million in the comparable quarter of 2007-08. In the case of the US, the decline was 14 per cent at $351.12 million in the last quarter of 2008-09, against $406.59 million. In this grim scenario, the original target of $6,386 million for 2008-09 through cotton textiles would be down by more than a $1,000 million, sources said.

Cotton textile exporters have been encountering delays in finalisation of export orders, opening of letters of credit with buyers, seeking extension of credit terms and cut in prices in the wake of tepid demand, the sources said noting that there were other domestic factors that militate against the interest of cotton textile exporters.

They include, increase in input costs and uncertain raw material price mainly on account of minimum support price of cotton, exorbitant rates of interest, insufficient working-capital due to declining profitability, reduction in duty drawback rates, delays in reimbursement of technology up-gradation fund scheme (TUFS) dues and un-rebated State/local levies.

The sources said the cotton textile exporters seek refund of un-rebated local levies which works out to 6 per cent of free-on-board value. This has rendered Indian products uncompetitive for exports compared with competitors such as Vietnam, Bangladesh and China.

While demanding restoration of the all-industry rates of duty drawback for textiles to pre-September 2008 levels, they have pleaded for pruning the rate of interest on rupee export credit /finance to 4 per cent for pre-shipment credit up to 180 days and post-shipment credit up to 360 days on minimum rate of interest, which is 7 per cent at present.

As the developed market is suffering from a dip in demand, the export segment has sought expansion of ‘Focus Market’ scheme to include countries such as South Africa, Mexico, Russia, Turkey, Philippines, Jordan, Iran, China, Indonesia, Vietnam, Brazil, Egypt, Cambodia, Kenya, Taiwan and Algeria so that exporters get grant of duty credit scrip at 2.5 per cent of FOB (Freight on board) value when exported to these countries.

As exporters of cotton yarn and cotton products are not in a position to utilise the accumulated Cenvat (Central Value Added Tax) credit on capital goods, dyes, chemicals and packing materials, the authorities should refund accumulated Cenvat credit, the export industry said.