Duty drawback on cotton yarn export to return

Written by Neha Pal | Neha Pal | New Delhi | Updated: Jul 26 2011, 08:18am hrs
The finance ministry has decided to reinstate the duty drawback facility for cotton yarn exports keeping in view the current situation of huge inventories with spinning mills and the contraction in demand for the item in the world markets.

The government had withdrawn the duty drawback on exports of cotton yarn through a notification on April 29, 2010 for discouraging overseas shipments in the backdrop of high domestic prices. It also put a ceiling on cotton yarn exports in January this year, which remained in force till March. According to a finance ministry official, The duty drawback facility for cotton yarn exports would be reinstated shortly.

"The finance ministry has given a confirmation to the textile ministry that the duty drawback facility would be reinstated shortly. This would come as a relief to the exporters, said a textile ministry official.

Commerce and industry minster Anand Sharma, who has recently been given additional charge of textile ministry, had said, "I will be recommending duty drawback on cotton yarn exports to the finance minister with effect from April 1, 2011." The minister had indicated: "A robust form of duty drawback would be introduced to compensate losses of the exporters due to withdrawal of Duty Entitlement Passbook scheme."

According to DK Nair, secretary general, Confederation of Indian Textile Industry (CITI), "Duty drawback was a time tested scheme and there was really no case for its withdrawal. The restoration of this scheme would give a boost to the export trade and profitability from exports.

J Thulasidharan, chairman, Southern India Mills Association (SIMA) said, "There was a constant decrease in the prices of cotton yarn and an urgent need to reinstate the drawback facility on export of cotton yarn. This would benefit the exporters who have been reeling under the pressures of the current crisis.

According to Mukund Choudhary, managing director of Spentex Industries, "The banning of cotton-yarn exports until April resulted in huge inventories with the spinning mills. This would come as a big relief for the mills that were suffering huge losses due to lack of demand coupled with the government policies."

SP Oswal, chairman and yarn business head of leading textile group, Vardhman Group of Companies told FE, "The demand for cotton yarn had been falling from January 2011 onwards which is why the companies were defaulting in making payments to the banks. The restoration of duty drawback would help in giving stability to these companies.