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| Mr Mukherjee hikes duty on branded garments |
| March 16, 2012 (India) |
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 Excise duty on branded ready-made garments has been hiked from 10 percent to 12 percent. However, abatement of 55 percent from the retail sale price has been enhanced to 70 percent, the Finance Minister said today.As a result, the incidence of duty as a percentage of the retail sale price will come down from 4.5 percent to 3.6 percent.
In many of the budgetary announcements made for the textile sector, the Finance Minister has exempted imports of automatic shuttle-less looms from payment of basic customs duty. He also spoke about allowing up to 51 percent FDI in multi-brand retail trade, which has now been put in abeyance. Efforts are on to arrive at a broad based consensus in consultation with state governments, he said. Mr Pranab Mukherjee has also exempted payment of customs duty on imports of aramid yarn and fabric used for the manufacture of bullet proof helmets. Basic customs duty of 5 percent would be levied on imports of new automatic silk reeling and other specified textile machinery. Second-hand machinery would now attract basic duty of 7.5 percent. A powerloom mega cluster will be set up in Ichalkaranji in Maharashtra at a cost of Rs 70 crore. Additionally, Weavers’ Service Centres will be set up in Mizoram, Nagaland and Jharkhand for providing technical support to poor handloom weavers. Mr Mukherjee also announced setting up of handloom clusters in Andhra Pradesh and Jharkhand in addition to the four mega handloom clusters already in operation. The Finance Minister has also proposed to provide assistance in setting up of dormitories for women workers in five mega clusters relating to handloom, powerloom and leather sectors. He has allocated Rs 500 crore to start a pilot scheme in the Twelfth Five-Year-Plan for promotion and application of geo-textiles in the North-East region. Mr Mukherjee has reduced basic customs duty on wool waste and wool tops from 15 percent to 5 percent and also reduced customs duty on titanium dioxide from 10 percent to 7.5 percent. He also revealed that the Government has recently announced a financial package of Rs 3,884 crore for waiver of loans of handloom weavers and their cooperative societies. In order to boost the growth of Micro, Small and Medium Enterprises (MSMEs), Mr Mukherjee has proposed to set up a Rs 5,000 crore India Opportunities Venture Fund with SIDBI, in order to enhance availability of equity to MSME sector. He informed that, two SME exchanges have been launched in Mumbai recently, to enable Small and Medium Enterprises (SMEs) greater access to finance. With the objective of promoting market access of Micro and Small Enterprises (MSEs), the government has approved a policy which requires Ministries and CPSEs to make a minimum of 20 percent of their annual purchases from MSEs. Of this, 4 percent will be earmarked for procurement from MSEs owned by SC/ST entrepreneurs. Click here to view budget snippets. |
| FTA with EU to boost India’s textile, garment exports (www.cottonyarnmarket.net) |
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The early implementation of India-EU free trade agreement (FTA), negotiations for which are currently in the final stage, will increase India’s textile and garment exports, according to experts. The India-EU FTA, to be known as the Bilateral Trade and Investment Agreement (BTIA), proposes slashing and eventual removal of duties on about 90 percent of bilaterally traded goods during the next ten-year period. The Indian textiles industry is in broad agreement with the Government over reduction and moving towards zero-duty on European imports as it is expected to enhance exports and thus benefit the domestic firms. Mr. DK Nair, Secretary-General of the Confederation of Indian Textiles Industry (CITI) told fibre2fashion, We have suggested the Government that we may not include any products from the textiles and clothing (T&C) sector in India”s negative list in the BTIA, on condition that the EU also does not include any T&C products in their negative list. We are also open to a zero-for-zero deal for T&C products from day one. As India exports more T&C products than it imports from West Europe, early trade liberalization with EU will help our exports, Mr. Nair explains. Elaborating further, he says, There are countries that already have zero duty access for textile products in the EU through their GSP scheme and other bilateral agreements. This disadvantage that we are facing currently will be removed by getting zero duty access to EU for our T&C products. Mr. A Sakthivel, who has recently taken over as Chairman of Apparel Export Promotion Council (AEPC) agrees, As far as India’s domestic industry is concerned, there will not be much impact of BTIA because the quality of garments manufactured in Europe are not produced in India. However, it will benefit exporters. In 2010-11, EU accounted for about US$ 8 billion or around 30 percent of India’s total T&C exports of US$ 26.8 billion. Comparing T&C trade between India and EU during January-September 2011, Mr. Nair says, EU”s total imports of T&C items from India amounted to nearly 6 billion euros apparel imports accounted for 3.93 billion euros and non-apparel textiles were worth 2.06 billion euros. In comparison, our T&C imports from EU have been negligible, especially in finished products. Informing about the current duty levied by India on fabric and garment imports from EU, he reveals, Our basic customs duty for import of fabrics and garments from EU is 10 percent in ad valorem terms. But most of the products in fabrics and garments are also covered by specific duties. In those cases, the ad valorem or specific duty applies on a which-ever-is-higher basis. Since European products are normally expensive, most of them attract only the 10 percent ad valorem duty (12 Jan 2012) |
Mafatlal tags along with younger fashion brand Kara
Purvita Chatterjee
After languishing for almost a decade, the century-old textile brand of Mafatlal is making a comeback by re-branding itself as Kara & Sungrace Mafatlal 1906.
Sungrace Mafatlal is the flagship brand of Mafatlal Industries, part of the Sungrace Mafatlal Group, headed by Mr Atulya Mafatlal. Kara is a youthful, international fashion brand launched by a first generation entrepreneur in the UAE.
The rights of the Mafatlal brand has been leased to a newly formed 50:50 joint venture between an Indian company, Meuse Garb, and the UAE-based fashion label Kara FZE.
Speaking to Business Line, Mr Navin Pandey, Global CEO, Meuse Garb, said, “We have acquired the rights of the Mafatlal brand for a 10-year period and would be paying royalty for the brand. Initially, we would be targeting the tier II and III cities and expect to touch a turnover of Rs 450 crore in the first year of operations.” The joint venture company is expected to invest Rs 100 crore in the first year of operations. Kara FZE is based in the tax-free zone of Ras Al Khaima in the UAE and will manufacture the newly launched brand.
Tier II, III focus
Staying away from the metros to begin with, the new retail brand of Kara & Sungrace Mafatlal 1906 would be sold through 600 franchise outlets with a range of readymade garments from casual to office wear. It would be priced “affordably” with an upward limit of Rs 2,000 to beat the unorganised and unbranded players in the garment business.
Going forward, the brand would be taken to the metros and retailed through company-owned outlets and multi-brand stores.
“Our strategy is very clearly to target the smaller towns and cities initially and to stay away from the metros which are already crowded with branded garments. Besides, we would like to take on the unorganised players in the retail garment industry more than the branded players. In fact, almost 83 per cent of the retail garment industry is dominated by unorganised players and there is enough scope for us to grow,” added Mr Pandey.
With the help of Kara FZE, the company is expecting to save on costs by manufacturing the brand in the tax-free zone in the UAE.
“With the tax breaks, we expect to save almost 15 per cent of our costs. Besides, as the Mafatlal brand is already well entrenched in the consumer’s mind, we would not have to spend too much on brand building either,” said Mr Pandey.
purvita@thehindu.co.in
Madurai Bench turns down garment exporter’s plea
The Madurai Bench of the Madras High Court has held that garment exporters had “bound themselves to satisfy conditions of export quota” given to them by the authorities which included ‘forfeiture’ of EMD (earnest money deposit) if export obligation fell short.
Dismissing writ petitions by Arasan Textile Mills (P) Ltd and Tuticorin Spinning Mills Ltd, Tuticorin, challenging orders dated June 14, 2005 and July 12, 2005 of the Second Appellate Committee, Ministry of Textiles, Government of India, New Delhi, rejecting the appeal of petitioners pleading that they could not fulfil the export obligation of garment because of the buyer refusing to honour contract and open L/C (letter of credit) due to fall in yarn prices and poor market conditions, Mr Justice K. Chandru said that this court “did not find any illegality” in the impugned orders confirming decision taken by the Textile Commissioner to forfeit the EMD.
Hence, the judge ruled, the respondents (the Textile Commissioner, Appellate Committee and the Ministry of Textiles) were at liberty to invoke the bank guarantee.
The petitioner contended that export obligation could not be fulfilled because of refusal by the buyer to honour contract due to fall in yarn prices and poor market conditions. The 2 {+n} {+d} Appellate Committee (R-1) rejected the petitioner’s plea.
An objection was raised on maintainability of writ petition in interfering with the imposition of the forfeiture clause on bank guarantee executed by the petitioner who entered into an agreement and obtained export quota. The export entitlement system (‘Quota Policies’) related to garments and policy for 2000-04 imposed conditions. The concession was extended by the Government of India on the basis of application of exporters and also on furnishing earnest money deposit. Under the policy, in case of shortfall by not carrying export obligations, EMD was liable to be forfeited.
The judge cited the judgment of the Supreme Court in Dwarikesh Sugar Industries Ltd vs Prem Heavy Engg Works (P) Ltd reported in AIR 1997 SC 2477 holding that no court should give relief in matters involving invocation of bank guarantee by Government authorities. The apex court also warned the other courts from acting contrary to the settled legal position.
This court did not find any illegality in orders of R-1 confirming the decision of the Textile Commissioner to forfeit the EMD. Hence, the petitions were dismissed.
Bangladesh garment exports to India see a big spurt
Anil Sasi
Impact of duty-free access to 46 apparel items
In October, a month after India announced duty-free access to 46 apparel items from Bangladesh, exporters from that country have reported orders for readymade garment worth an estimated $90 million from India.
The order inflows in just one month amounted to a quarter of the $360-million worth of readymade garments that Bangladesh is estimated to have shipped into India in the 12 months of the last fiscal (2010-11).
A Bangladeshi industry delegation, which was in India late last week to reassess business opportunities, said it expects exports to India to touch the $2-billion mark over the next three years or so, going by the current trend.
The India-Bangladesh Chamber of Commerce and Industry (IBCCI) delegation, in the course of deliberations with Indian textile and clothing industry bodies, conveyed that October’s order inflow estimates were collated by the Bangladesh Government based on local industry inputs.
These include orders from Indian retailers focussed on the domestic market and also from Indian exporters from locations such as Indore and Tirupur. In early September, India had announced duty-free access to 46 garment products from Bangladesh, including items such as pants, shirts, blouses, skirts, kids wear, cotton nightwear, jeans, swimwear and tracksuits.
The Bangladeshi garments sector, despite lacking a raw material base, has emerged more cost competitive than the Indian clothing industry and now has an edge even over the Chinese garment industry in specialised clothing items such as woven garments and knitwear. Cheap fabric imports and phenomenally low labour costs back home are among the advantages that Bangladesh is using to the hilt.
Coming at a time when labour costs are trending upwards in India and infrastructure constraints such as power and transportation bottlenecks continue to stymie the manufacturing sector, the option to source from Bangladesh is being seen as an increasingly viable option for Indian players.
Amid the opportunities, Indian industry players have also raised apprehensions about zero duty entry for Bangladeshi garments indirectly offering Chinese fabrics duty-free access into the country.
In the case of the Bangladesh-India pact, the Rules of Origin of exportable garment products are to be determined by the Agreement on South Asia Free Trade Area norms, which permits garment items made of imported fabrics to qualify for duty-free market access to India subject to the condition that at least 30 per cent value addition should take place in Bangladesh.
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