Date:27/01/2005 URL: http://www.thehindubusinessline.com/2005/01/27/stories/2005012701990300.htm

Back New drawback rates based on weight irk textile sector

Anil Sasi

New Delhi , Jan. 26

IT'S a `weight' versus `price' debate in the textile sector.

The Government's recent notification on revised rates forduty drawback, where the drawback rates are fixed in terms of the weight of the exported product instead of its value, has the industry up in arms.

While the move is largely aimed at tackling the practice of over-invoicing of exports, the industry claims that the revised drawback available to exports is inversely proportionate to their quality and value addition, and is, therefore, irrational.

"With the quotas having been phased out, the Government should have logically encouraged value addition in exported items. Instead, the notification implies that home furnishings and garments exporters using cheaper but heavier fabrics, would get higher drawback than those using high-quality lighter fabrics," an exporter said.

For instance, while the total duty incidence on a shirt and a jacket is not very high, the duty drawback that would be available to them would have a huge difference because of the variation in weight. Similarly a silk bedspread, which would fetch a higher export price, than say a cotton bedspread, could be entitled to getting a lower drawback as compared to the cotton product on account of less weight.

Industry representatives have written to the Government on the issue and have sought a meeting with the Finance Minister.

The exporters have also claimed that the new policy could lead to delays and higher transaction cost at Customs checkpoints.