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India : Textile exports may fall post quotas |
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2004-7-30
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Textile quotas are to definitely go if mandarins of the ministry of textiles are to be believed. According to them, as the EU and US have notified the World Trade Organisation (WTO) about this. This clearly means that there would be not postponement of deadline, due to intense lobbying by the textiles sector in developed countries.
But, industry has apprehensions that non-quota barriers like preferential and free trade agreements with certain countries that provide for a 10-12 per cent tariff differential along with trans-shipment rules and environmental and social conditionalities could be used to restrict imports.
Preferential agreements with the Carribean and African countries and a bilateral agreement with Vietnam for textiles by the US are also on the sensitive list. On the social front, discrimination on the grounds of produce by sweat shops and such like issues could be raised.
Subsidies is another area which can be a cause for concern. Take the case of duty entitlement pass-book (DEPB) scheme, which may not pass muster at the WTO. It either be scrapped or modified in line with the guidelines.
Recent budget has brought in lot of succour for the harassed textile industry with proposal to abolish the excise duty and government mooting steps to encourage investment, especially in the high-value-add processing segment. Their only regret is that the move has come a bit too late in the day to create a level playing field for industry to make optimum use of it — as the quotas will be abolished in less than six months from now.
The government anticipates Rs 60,000 crore worth of investment in the sector and simultaneously, about 1 million jobs would be created over the next three years. But industry sources indicate that Rs 70,000 crore investment over five-to-six years with a similar increase in turnover is more realistic in terms of achievement. And all that is obviously dependent on the government not tinkering with the existing policy again.
Hence, even as the feeling of ill preparedness for facing post quota era (2005) exists, the textiles industry expects positive with growth and investments, likely to kick start only by 2006-07.
Key corporate players such as Alok Textiles, Arvind Mills, Ashima Syntex, Nahar Group, Vardhman Group and Welspun among others have already put up plans and investments as part of the overall preparedness.
These companies hope to cash in on the opportunities thrown up by the abolition of quotas. Says SP Oswal, chairman, Vardhman Group,”We plan to invest close to Rs 1,000 crore over the next 3-5 years in the spinning, weaving and processing segments. In the current year we intend to spend close to Rs 200 crore on expansion, expected to be completed by October 2005”.
More importantly, imports too are likely to rise. As an industry expert points out, ”The import intensity will increase, but we should not develop an alarmist attitude on the subject.”
Archaic labour laws seems to be addressed and stands in the way of consolidation and growth in the industry, inform industry players. Flexibility on such an important issue could be a big boost for the sector. |
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