Financial Daily from THE HINDU group of publications
Tuesday, Oct 11, 2005
Industry & Economy
Exports & Imports
Steady fall in manmade textile exports
Mumbai , Oct. 10
MAN-MADE textile exports have been on a downtrend in the last few months, despite the end of the quota regime.
The monthly figures from January 2005 show a steady decline in exports, except in April, compared to the corresponding period last year.
In January, exports were down to Rs 645 crore (from Rs 710 crore in January 2004); February Rs 600 crore (Rs 709 crore); March Rs 834 crore (Rs 933 crore); May Rs 521 crore (Rs 737 crore); June Rs 556 crore (Rs 753 crore); and, July Rs 642 crore (Rs 798 crore).
The decline is being largely attributed to the reduction of Duty Entitlement Passbook (DEPB) rates in September 2004.
According to Mr R.L. Toshniwal, Chairman, Synthetic and Rayon Textiles Export Promotion Council, manmade textiles was one of the fastest growing textile segments, but the inadequacies in Government policy support schemes, high transaction costs (15-20 per cent of f.o.b. values of exports) and the non-reimbursement taxes were hurting the sector.
He said that the Government had extended the DEPB scheme to December 31, 2005.
However, the notification announcing the extension was unclear on whether the DEPBs would be valid for duty payments immediately after December 31, 2005.
Mr Toshniwal said that it might lead to a situation where Customs authorities might stop debiting DEPBs for the purpose of duty payments immediately after the deadline. He urged the Government to confirm whether all valid DEPBs were eligible for duty payments till its expiry.
The DEPB scheme grants credit at specified rates of f.o.b. value of exports under the Export Promotion Scheme.
It is meant to neutralise the scheme of the incidence of basic customs duty on the import of inputs covered under the Standard Input Output Norms. The DEPBs are valid for two years from the date of issue.
He said that despite the Prime Minister's Economic Advisory Council recommendation not to impose income tax on companies reporting negative profits, the Central Board of Direct Taxes (CBDT) had still neither issued any notifications nor expressed an opinion on covering DEPB under Section 28 (iiia) of the Income Tax Act, 1956.
Prices of indigenous raw materials, transportation and freight had risen sharply in the recent past. Fuel costs had risen more than 75 per cent since fuel prices started rising.
Also China had recently reduced prices substantially on export products, making it even more impossible for Indian exporters to compete.
Further, the removal of Rule 12-B in the Union Budget 2004-05 made it impossible for merchant exporters to take Cenvat credits as they were no longer registered with the Central Excise Department.
Mr Toshniwal urged the Government to restore Rule 12-B so that exports could maintain its edge.
Despite India being the fourth largest producer of manmade fibres and yarns in the world, her share was insignificant and was declining, Mr Toshniwal said.
This was so even though import restrictions had been removed with the end of the quota regime.
He urged the Government to clarify its positions on all these issues as the country's synthetic exports were suffering.
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