Kochi: Textile exporters in Tirupur, the country’s textile capital that last year exported material worth Rs11,000 crore, face losses of up to Rs385 crore following the finance ministry’s decision to lower the duty drawback for the industry from this month.
Duty drawback is the concession provided on customs and excise duties on the inputs used for making textiles for the export market.
This comes soon after the Reserve Bank of India (RBI) decided to withdraw the 2% interest subvention on export credit from 30 September, following the US dollar’s bounceback against the rupee.
In addition to reducing the concession for cotton knitted garments to 8% from 11%, the finance ministry has lowered the value cap for claiming duty drawbacks on various knitted items, said A. Sakthivel, president of the Tirupur Exporters Association.
For instance, the value cap for knitted shirts has been lowered to Rs42 a piece from Rs53, so exporters cannot gain even if they make changes that can fetch better prices, he added.
The textile industry in Tirupur, Tamil Nadu, was already being stretched by higher costs for yarn, power, processing and transport, Sakthivel said.
“It is not possible for the industry to increase prices for garments as these were decided and quoted nine months to a year ago and cannot be altered,” said Sakthivel. “Another cause of concern is that foreign buyers have other sources in neighbouring countries like China, Bangladesh and Pakistan, and emerging competitors like Vietnam, Cambodia and Indonesia.”
Prices of cotton yarn, a key raw material, have increased 25% over the past few months.
While the hike in petrol and diesel prices have pushed up the prices of dyes, chemicals and polythene bags made from petroleum products, electricity costs have surged 2.5 times as manufacturers have been forced to resort to captive power generation following frequent power cuts in the state, he added.