?The Centre has delivered yet another devastating and crippling blow to garment exporters by the reducing the duty drawback rate (DDR) from 11.2% to 8.8% effective September 1,? said, Rahul Mehta, president, Clothing Manufacturers Association of India (CMAI). The new drawback rate in the made-up category is between 8.2% and 9.5%.
?The cut in the rates for the garment industry could not have come at a worse time. The industry is in the process of recovering from the crisis caused by currency problems and is also coping with the harsh reality of markets across the globe being in the grop of or heading for severe recessionary inflation and rising costs,? Mehta added.
The cut in duty drawback rates along with the withdrawal of interest subvention of 2.5% and the lowering of value caps has resulted in the industry being addled with unbearable burden of around 5% and with costs of vital inputs rising by 10% – 15%. This would mean severe losses and ceding international contracts to competing nations like China, Pakistan, Bangladesh, Indonesia where exporters are treated with friendly sops to overcome similar problems, Mehta added. The lowering of value-caps by approximately 10% would also discourage exporters from selling high-value garments.
?The world is trying to move up the value-chain, whereas our industry is actually being discouraged from selling high-value products,? Mehta added. ?The government has conveniently overlooked state and corporation taxes and levies borne by the industry that aggregate to 5% to 6% FoB value, despite the industry clamoring for the same, and an assurance from the government that these deficiencies would be addressed,? he said. ?It is time for the government to keep its promises and not cripple the industry,? Mehta lamented.