Indian textile industry seeks increase in export incentive to tackle tariff hurdles

The Indian textile industry is facing tariff barriers imposed by major importing countries such as from the European Union, Canada and China. While the competing countries such as Pakistan, Bangladesh, Cambodia and Vietnam have negligible duty. Hence to overcome these tariff barriers the Government has been urged to increase the export incentives under the Focus Product Scheme to seven percent from two percent.

Europe imposes four percent duty on yarn, eight percent levy on fabrics and 12 percent duty on garments imported from India, while shipments from Pakistan, Bangladesh and Cambodia are duty free.

China levies the highest duty of 14 percent of garments, 8.5 percent on fabrics and 3.5 percent on yarn while Pakistan can export garments and fabrics duty free and pays only 3.5 percent on yarn. Canada imposes tariff of 17.5 percent on garments imported from India.

According to Manikam Ramaswami, Chairman, Texprocil, the Government provides export incentives based on employment generation, freight cost and net foreign exchange earned.

The industry scores on all the three counts as it generates one lakh direct employment for every $1 billion of export and generates almost 100 percent net foreign exchange as it hardly imports any raw material. The freight cost is among the highest as the consignment is bulky and value is low.

It is a pity that set-top boxes and push button phones made predominantly with imported components get 300 percent and assembled mechanical goods and pharma chemicals get over 200 percent more incentives than textile.

The Government wants the textile industry to create 32 million jobs in the next 10 years and increase exports to $45 billion this fiscal from $40 billion last year. Given the long value chain of 4-5 months from processing the cotton to exporting garment and high cost of finance, the industry will be able to meet the target only if the Government provides support by extending sops.

While the Apparel Export Promotion Council is seeking to Government restoring three percent interest subvention for all categories of garment exports provided till last March.