FOR the domestic textile sector, already bleeding due to the rupee appreciation, this may add insult to injury. The government is all set to formalise unconditional duty free access of garments from Sri Lanka and Bangladesh up to specified limits. The move is guided by the South Asian Free Trade Area Agreement (Safta).
The decision to allow duty-free imports of eight million garment pieces per calendar year from Bangladesh with the condition that some raw materials have to be imported from India was taken last year. However, under the new dispensation, exporters from Bangladesh will be allowed to export without restrictions on raw material sourcing.
Similarly, Sri Lanka may also be allowed duty free access to the Indian market up to six million pieces. For an additional two million pieces, exporters will have to pay concessional duties. “The Cabinet is expected to clear the proposal on Thursday,” an official said.
Industry experts say that the move would hurt the domestic textile industry. “The domestic textile industry is greatly disadvantaged compared to those of Bangladesh, Sri Lanka and China and giving trade benefits to these countries at a time when your industry is in great distress would have an adverse impact,” Vardhman group chairman S P Oswal said.
“It is also unfair because these countries have not extended similar benefits to India,” he added. Commenting on the trade agreement, Confederation of Indian Textile Industry (CITI) secretary general D K Nair said, “Getting into free trade agreements (FTA) with all Asian countries is against the interest of the domestic textile sector. FTAs with the US or European Union would, however, be beneficial for the Indian textile industry.”
According to experts, domestic companies will have to either bring down the prices or scale down production to make way for cheaper imports. “To slash prices is not possible under current market situation as profit margins are very thin,” Mr Oswal said.
Garment exporters, however, say that their main worry is rupee appreciation vis-à-vis dollar. “The move would affect mostly the garment companies catering to domestic needs,” Orient craft chairman Sudhir Dhingra said.