The Hindu Business Line : `Govt must refund service tax to exporters thro' drawback route'

THE Indian garment industry has been in the thick of news after the end of the quota regime at the inception of 2005 when it was plagued by conflicting statistics about its export performance as the months rolled by — those from DGCI&S, Kolkata, showing decline in readymade garment exports while importing countries figure from the US and the European Union (EU) revealing a pick up.

Unfazed by the data discrepancies, the Chairman of the Apparel Export Promotion Council (AEPC), who is into the final months of his second term as the chief, Mr A. Sakthivel, is quite sanguine about the performance of the industry.

He said some categories had registered good growth rates especially T-shirts, bottoms and undergarments in the US markets andmen's shirts, ladies blouses and T-shirts for women in the European markets.

Expectations are that there would be a 20-per cent growth overall in exports as compared to last year. Mr Sakthivel does not foresee any problem for the garment industry right now in that "we have another advantage as 20 million pieces are lying in European ports against Chinese goods. Buyers there are looking for India, as they do not want to take the risk of buying Chinese goods now.

As an alternative, they are looking at India because we have both orthodox and synthetic raw material base. Our export growth rate is also not alarming unlike China".

The AEPC Chief makes no bones about the fact that "we could have done better than what we are doing now but for the Government reducing the drawback rates at the start of the year. Price is a very crucial factor after the quota regime and we are not able to get this from the buyers.

That is why I have been coordinating with the Government to get the duty drawback restored on value basis".

Excerpts:

On the problems plaguing the exporters:

Exporters should not pay service tax which works out to 2.5 per cent and at least the Government should refund it through drawback route. Service tax should be included in drawback, which would help compensate for infrastructure hurdles exporters face.

China gives a VAT refund of 13 per cent to exporters. We are not owned either by the Centre or the States. The Centre makes Exim Policy, while all the factories are in the States — States levies include fuel charges, octroi and other incidentals. More than that, we are only talking about labour laws while productivity is going down and compared to China we are very weak here.

As the UPA government has announced 100 days of work in rural areas under its employment guarantee scheme, we are ready to train workers and employ them up to 275 days if only the Government takes seriously the textile industry by looking at it separately from other industries and introduce contract labour so that the lean period of two months in a year could be permitted.

About his contribution to the industry:

I restructured the AEPC and brought down the staff strength from 550 to 140 with least adjustment cost. A separate chapter on textile industry in the Union Budget was introduced in my tenure.

I have also beefed up six existing Apparel Training and Design Centres (ATDC) and opened six more to provide skilled manpower to the apparel industry. Three more such ATDCs are on the anvil.

While there were two mega shows at New York both before and after the end of the quota regime in 2004-05, the Indian exporters took part in mega shows in Spain (Madrid and Barcelona) and Paris and in the three Fashion Week of Hong Kong in a big way. The awareness of Indian fabrics and designer dresses was created in all these shows. The Rs 65-crore jumbo project — Apparel International Mart at Gurgaon, is getting spruced up for inauguration in November 2005.

In order to enhance productivity, product development and diversification for the apparel industry, a proposal has been forwarded to the Government to foster an Apparel Research and Development Centre both at Gurgaon (for woven segment) and Tirupur (for knitted garments).

On the new Apparel Park Scheme:

The Netaji Apparel Park located in Tirupur helped in extension of existing units in which out of 52 factories, 32 have started functioning, employing 9,000 workers. Once all apparel parks go on stream across the country, they would execute Rs 1,500-crore exports.

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