Apparel Exporters Body seeks sops as global competitiveness dims and expectation of jobs loss

Package, If Approved, Will Add Upto Rs 1800 - Rs 2000 Cr.

Now that jobs are facing the axe in the textile and apparel sector (T&A) due to rising rupee and competitiveness in the international arena is diminishing, Apparel Export Promotion Council (AEPC), representing over 8000 exporters of apparel and ready made garments, has presented a charter of demands seeking sops and rebates for a temporary period to overcome the rupee rise.

Says Vijay Agarwal, Chairman, AEPC, "We have presented a charter of demand to the Ministry of Textiles seeking sops for a period of 6-12 months to enable us to tackle the grave crisis facing the T&A sector." Among the demands of the sector are: refund of all state level taxes through the drawback route which total upto 6%, make packing credit cheaper by reducing the rate of interest on the same, refund of service tax, a dual currency rate (i.e. the rate of currency will be higher for exports), providing 10% Credit Linked subsidy and relaxation in labour laws to allow contract labour. AEPC has demanded these sops only for a limited time until the rupee stabilizes.

The council has welcomed the move to extend upto 2012 the technology Upgradation Fund Scheme which will encourage investment in the T&A sector in the country. Garment manufacturers get a 10% Capital Subsidy in addition to 5% interest subsidy for machineries under TUFS.

Adds Agarwal, "Even if all our demands are met it will cost the government a maximum of Rs 1800-2000 crore - and that too in terms of taxes not collected and not by actual cash outflow."

The T&A sector, which is India’s largest net foreign exchange earner and the largest employer, has never been hit so badly. Consider this: the rupee which was trading in the region of Rs 46-47 against the dollar has appreciated to about Rs 39.50 in less than 6 months time. What’s more the international buyers are refusing to enter into Euro or other currency contracts, adding to the woes of the Indian T&A sector. And the impact is there to be seen: recently issued figures by the Ministry of textiles show that exports of ready made garments have shown a decline of almost 17% from US $ 2.4 billion during April-Jun’07 to about US $ 2 billion. The scenario for Knitted Apparels and Woven apparel doesn’t inspire confidence either. Knitted Apparel exports during Apr-Jun 07 decline by 12% to US $ 800 million from the corresponding figure of US $ 906 million whereas there has been a decline of about 17% in exports of woven apparel from US $ 1.5 billion to US $ 1.25 billion

The world trade of textiles and apparels is expected to grow to about $650 bn by the year 2010A from the current US $422 bn and unless quick, effective measures are not implemented, India will remain a mere spectator while other countries like Bangladesh, China, Vietnam etc continue to increase their share.

Source : Equity Bulls

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