Financial Daily from THE HINDU group of publications
Tuesday, Mar 26, 2002
Industry & Economy
Dhaka ban on yarn import via landports irks exporters
KOLKATA, March 25
THE sudden ban by the Bangladesh authorities on the import of all varieties of yarn into the country through India-Bangladesh land ports has upset Indian yarn exporters, who feel that the blanket ban will neutralise the geographical advantage that the country enjoys vis-à-vis Pakistan.
Through a circular, the Board of Revenue of Bangladesh has stopped, with effect from March 9, the import of all yarn into Bangladesh through land ports. The reason cited for this action is the alleged high level of yarn stocks, worth about $1 billion, with various Bangladesh textile mills and the smuggling of yarn through the land ports.
The Chamber of Textile Trade Industry (Cotti) here apprehends that the action will only discourage the burgeoning India-Bangla trade. Moreover, since only India shares a land boundary with Bangladesh, the ban on import through land ports will neutralise the geographical advantage in trade India enjoys with Bangladesh.
The chamber said it failed to understand how a ban on official exports can stop smuggling because history suggests that the volume of illegal trade increases as soon as a ban is put on official exports. Cotti countered the allegation of high level of inventory position stated to be Tk 6,000 crore or $1 billion with Bangladeshi mills. A chamber source indicated that Indian exports of cotton yarn to Bangladesh are worth of Tk 1,200-1,300 crore ($200 million ) per annum. This means that the inventory position as stated by the Bangladesh authority is equal to India's five years' export.
Informed sources point out that Indian exporters are stuck with goods in transit worth $10 million. These goods have been brought to Kolkata for onward export to Bangladesh against established contracts. But the "unilateral and arbitrary" decision will hurt India's textile trade and industry, which is already passing through its worst crisis.
However, the chamber did not see any political motive behind the move, as suggested in some quarters that the decision has been taken to give Pakistan yarn an edge over Indian supplies, or as a "retaliatory step," against the Ayodhya issue. Nonetheless, the chamber admitted that the landed cost of Indian yarns at sea ports of Bangladesh will be at least 10 cents costlier if the consignment is despatched by ships.
It is pointed out that the Bangladesh Government provides 25 per cent cash subsidies to local textile industry for yarn produced in Bangladesh to compete Indian yarns, although Indian mills, as such, do not have a running competition with the Bangladeshi mills. Indian supply mainly caters to the requirements of quality-conscious buyers who produce garments solely for export into Europe and North America. It is pertinent to note that Bangladesh enjoys duty-free and quota-free access to European market.
Claiming that Indian spinning industry and garment buying agents play an important role in the development of garment industry in Bangladesh, the Cotti source indicated that India exports yarns to Bangladesh to the tune of Rs 11,000 crore per annum, out of which Rs 3,000-crore worth of yarn goes to garment manufacturers and the balance goes for trading purposes.
When contacted, Mr Pramod Modi, chairman of the international trade committee of Cotti, told Business Line that the ban of yarn import through land ports was set to hit West Bengal textile trade a mortal blow. "The State stands to lose heavily, as about 5,000 persons are directly/indirectly employed in the export of yarn and related activities, which include clearing agents, transporters, export houses and firms and unloading daily labourers and warehousing staff."
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