Worried over the state of affairs in the global arena for the Indian textile value added segment in terms of competition, the AEPC Chairman Premal Udani has recently written a letter to the Minister of Commerce, Industry & Textiles seeking his immediate intervention.
In his letter, AEPC Chairman has stated that besides exports directly, cotton and cotton yarn are the raw materials mainly used for the production of apparel, made-ups and similar value add products and the real reason for low prices/lack of demand currently for these products is because the value added segment is facing severe competition and contraction of demand from the end consumers.
Stating further, he said due to mainly the locational advantage, cotton/cotton yarn production in India enjoys a near monopoly status and very few countries are competing with India in terms of acreage/total production. However, this locational advantage available to the raw material producers has no benefit for the value add apparel/made up industry, as these sectors are required to compete with international buyers for Indian raw materials. Consequently, in spite of being in the top 3 producers for cotton/cotton yarn, the value added segment has less than 2.5 % share in world market of apparel.
Making his point that incentivization of value add product can automatically create demand for the entire value chain, Udani said, If cotton and cotton yarn are eligible for 5.6 % and 7.6 % DEPB with retrospective effect, it stands to logic and reason that the apparel sector because of its value addition deserves minimum 15 % incentive.
Adding further, he said effectively the value added sector is asking for only differential compensation as apparel exporters are eligible for approx 7.5 % as drawback and as per policy they can claim either of these two (drawback or DEPB). Such a step would not only give tremendous fillip to exports of value add products like apparel but will also boost exports of manufactured products out of the country, which is one of the goals of the 12th Plan.
It will be a great tool in the hands of value added sector to compete effectively with those countries, whose export policies are tailor-made for the apparel industry.
Since DEPB is to be phased out by 30 September 2011, AEPC Chief has urged the Minister to reintroduce the Market Linked Focus Product Scheme (MLFPS) as it existed for the US prior to 30 September 2010 and for the EU prior to 31 March 2011 and enhance the value of the scrip from 2 % to 7.5 %.