The DEPB scheme is meant to neutralise the customs duty element in export production and it is proposed to be discontinued after September this year as it allegedly runs counter to the World Trade Organization (WTO) agreement on subsidies.
If cotton and cotton yarn are eligible for 5.6% and 7.6% DEPB benefit with retrospective effect, it stands to logic that the benefit for the apparel sector is a minimum of 15%, said Premal Udani, chairman, AEPC. Currently, the DEPB rate for garment exporters is 6.7%.
After keeping them suspended for a while, the government has recently restored the DEPB benefits for cotton and cotton yarn following a sharp fall in domestic and international prices of these commodities from October 1, 2010 and April 1, 2011, which compressed the exporters margins.
Since DEPB is to be phased out by September 30 this year, we request the commerce ministry to reintroduce the MLFPS (focussed market) scheme and enhance the value of the script from 2% to 7.5% with effect from October 1, 2010 for the EU and US markets, said Udani.
The government had introduced a market linked focus product scheme in April 1, 2010 for the US and EU markets which was withdrawn for the US with effect from October last year and for Europe with effect from the start of this fiscal.
The letter said, Cotton and cotton yarn are raw materials mainly used for the production of apparels, made-ups and similar value-added products. The reason for lack of demand for cotton and cotton yarn, and consequent tumbling of prices, is that the value-added segment is facing severe competition and contraction of demand from the end consumers.
India is among the top three producers for cotton and cotton yarn in the world, but its share in the apparel market is 2.5 %.
With fears of recession and overall nervousness in overseas markets, the support from the government will enable the apparel sector to compete effectively with those countries whose export policies are tailor-made for the apparel industry, said DK Nair, secretary general, Confederation of Indian Textile Industry (CITI).