A reduction in duty drawback rates, which came into force earlier this week, has been described as “deeply disappointing” by apparel exporters who say the recession is “far from over” for the ready-made garment sector.

The new duty drawbacks, which offer exporters a refund of import duties on raw materials used, are effective from Monday (20 September).

For cotton garments the rate is now 7.55% of the FoB cost, compared with 8.8% before. For garments containing a blend of cotton and manmade fibre, the rate is reduced to 8.6% from 9.8%. And for garments of manmade fibre,it falls to 9.5% from10.5%.

For ready-made garments made of silk and wool, the rates are 10% and 7.5% respectively. While for garments containing wool and manmade fibre blends, and for those made of cotton with 1% or more by weight of spandex/Lycra/elastane the new drawback rates are 8.6% and 8% respectively.

According to the Apparel Export Promotion Council (AEPC), the Union Budget for 2010-11 put a sharp increase in duties on most input materials, with excise duty increased by about 25% over last year. In addition, a fresh duty of 5% was levied on crude oil – a key input in the garment production process.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

“In this scenario, the industry fails to understand the rationale of reduction of duty drawback by 15% when duties were increased by over 25% and fresh additional duties were also levied on inputs,” said AEPC chairman Premal Udani in a letter to finance minister Pranab Mukherjee.

“The apparel industry is deeply disappointed and feels very badly let down at the new revised drawback rates.”

He added that in the first four months of the current financial year, exports declined by 8% over last year. The industry is also reeling from an unprecedented price rise of its basic materials like raw cotton, cotton yarns and fabrics.

“A contraction of exports means loss of jobs,” said the AEPC chairman. “By our estimate, over a million jobs have already been lost. More will follow if urgent corrective steps are not taken.”

Mr Udani called a restoration of the old drawback rates, as well as increases if possible.