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Textile exporters request tax reimbursement to offset Re effect
June, 14th 2007

Textile and garment exporters on Wednesday requested the government to reimburse transaction costs, local taxes and reduction of interest rates on pre and post-shipment deliveries, to offset the impact of rupee appreciation.

A delegation comprising representatives from cotton textile, apparel, handloom, silk and synthetic and rayon sectors, approached industry and commerce minister Kamal Nath with the hope of attaining partial relief from the rising rupee through the reimbursement of local taxes.

An unprecedented appreciation of the rupee during the last six months has hit the segment hard, decelerating the growth of exports in the segment by over 40%.

The meeting was organised by the Federation of Indian Exporters Organisation (FIEO).

Nath assured exporters that he was aware of the problem and would take up the issue with Prime Minister Manmohan Singh and finance minister P Chidambaram.

Confirming the move, the chairman of Textile Export Promotion Council Prem Malik told FE the reimbursement of these levies is WTO compatible and will give some relief and offset the losses suffered to some extent.

The textile and clothing industry had lined up an investment of Rs 32,000 crore for the current fiscal. However, the rupee crisis has hit them very hard and they have to cut their projections by 50% from $50 billion in exports to $25 billion in the Eleventh Plan period, Malik said. The textile and apparel exports are pegged at $11 billion, which constitutes 14 % of the total exports of $160 billion, vice chairman of the Apparel Export Promotion Council Rakesh Vaid said. Due to the recent crisis, the exports are expected to decline to $9 billion, and if the situation continued, the industry will downsize workforce by about 15 lakh in the next six months, he added.

It may be noted that local taxes and infrastructure disability in the country constitute 5.2% and 7% of the total production cost in the segment, respectively. At present, the pre and post-shipment delivery interest rate is 9.5%.

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