Indian textiles and clothing industry has been facing a long drawn recession since April 2014 due to glut in the global market and inadequate export incentives to compete with other textile manufacturing countries in the international market. The industry associations across the value chain have been pleading the Central Government to provide adequate incentives to create a level playing field in the open market and utilize the surplus production capacity by enhancing exports. Against this background, the Central Government has recently extended 2% MEIS export incentives to fabrics and other products and also included a large number of countries under the eligible list. The industry associations have also been requesting the Government to encourage value addition by enhancing the duty drawback rates, refund of various Central Government levies. Against this background, Central Board of Excise & Customs has issued a notification revising the drawback rates and value caps based on the data furnished by the respective manufacturing sectors.
In a press release issued recently, Mr.P Nataraj, Deputy Chairman, The Southern India Mills’ Association (SIMA) has thanked the Central Government, particularly the Minister of State for Commerce & Industry (Independent Charge), Ms. Nirmala Sitharaman and the Chairman, Duty Drawback Committee , Dr. Saumitra Chaudhri for favourably considering the pleas made by the association and enhancing the drawback rates and value caps for various value added products such as yarns counts in 100s and above, fabrics with less than 200 grams per sq.mtr, knitted and woven garments. He has said that the attractive rates given for certain value added products would encourage the textile industry to give more focus for value addition which would generate more foreign exchange. He has stated that there is a marginal reduction in the normal products, both in the drawback rates and value caps, which could have been avoided considering the crisis being faced by the industry.
Mr. Nataraj has pointed out that the revised rate also encourages the industry to follow the Cenvat route to prepare the industry for the forthcoming new levy GST. He has stated that when the exports opt for cenvat facility, they would get enhanced rate and value.
SIMA Deputy Chairman has stated that for the first time three count groups have been given for yarn based on the request made by the association so that the value added yarn producers would get better compensation under duty drawback system. For example, spinning mills in South India account more than 90% of superfine count yarn exports (100s and above) and such yarn is eligible to get Rs.25.60 per kg as drawback value as against the previous value of Rs.18.00 per kg. Similarly, the woven grey fabric with less than 200 grams per sq.metre were earlier given Rs.37/- per kg and now the revise rate is Rs.40/- per kg. However, for the fabric above 200 grams per sq.mtr, the value cap has been steeply decreased from Rs.37/- to Rs.19/- per kg. The drawback rate for cotton garments have been increased from 7.5% to 7.7% and value cap has been increased from Rs.75/- per kg to Rs.103/- per kg. In the case of cotton made ups, the value cap has been reduced from Rs.71/- to Rs.70/- per kg while the rate has been increased from 7.1% to 7.3%.