With readymade garment exporters losing competitiveness due to lower rates of export incentive scheme, the exporters in the northern region fear the new rates will significantly bring down the apparel sector’s ability to export. They also apprehend that it will disrupt the entire value chain, including loss of employment.
Expressing concern, they have requested the Centre to immediately review the new rates of export incentive scheme to boost the exports. Last week, the Central Board of Indirect Taxes and Customs (CBIC) had slashed duty drawback rates on cotton, man-made and blended garments. The new drawback rates are effective December 19. The move came as a surprise for the apparel industry of Punjab and Haryana.
The scheme called duty drawback rates for apparel industry has decreased for most of the garment categories such as cotton, man-made and blended. In a letter written to the Finance Ministry, the Apparel Export Promotion Council (AEPC) has said the move has come as a setback for the industry which is already losing global market share due to reduced competitiveness after the implementation of GST. “The policy support for the industry after GST has significantly declined by around 5.5%,” it said.
Barring few months, apparel exports are continuously declining since October 2017, mainly due to stiff competition, slowdown and discontinuation of certain export incentive.
“The capacity utilisation of the readymade garments has touched a new low of 70% because of dwindling export orders. The situation is alarming as textile sector is one of the biggest employers,” said Lalit Thukral, MD, Twenty Second Miles.
“The council in its letter pointed out that the new drawback rates have a gap of 2.20% to 2.52% from the proposed rates,” said Harish Dua, a garment exporter. The Council has sought the enhancement of rates as has been done for the other important segments such as yarn, fabric and made-ups so that the entire value chain can benefit. To boost the exports, the Council has provided detailed cost analysis for enhancing the drawback rates.
Thukral said many of the exporters have started shifting focus to the domestic market.
According to industry, around 30-40% of exporters have already started utilising their capacity to cater to the domestic demand. The domestic market is pegged at around Rs 3.25 lakh crore and is almost three times more than the exports market. However, manufacturers having deep pockets can sustain in the domestic market.