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India:Fabric imports from China may swing
with the budget |
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2005-1-21
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India20th January 2005 |
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Indian exporters usually source fabrics from China, Taiwan, Indonesia and Thailand, to create value-add products and export them abroad. Major textile exporters currently source almost 50 per cent of their fabric requirement from countries such as China.
About 70% of their fabric requirements are sourced from there and this is thanks to mainly China, having made deep investments in enhancing their fabric capacity, especially man-made fabrics that works to benefit Indian garment exporters.
According to Raghav Gupta, principal researcher at KSA Technopak, India imported fabrics worth about Rs 1,700 crore in 2003, and 70 percent of it was exported.
Exporters prefer imports as Indian mills cannot satisfy their requirements in terms of quantity and delivery schedules. Besides, it is the 15-20 percent cost differential of fabric that really matters when sourcing fabric from abroad.
Concurring with the above view, Virender Uppal, Partner, Richa & Co says, “Indian manufacturers still ask for 90 to 120 days’ time to deliver 500,000 metres of fabric. Chinese manufacturers are able to supply 1 million metres in a shorter time.”
It is for this reason that Richa & Co – an $80-million company imports 25-30 per cent of its fabric requirement for garment exports.
Calling the situation unfortunate, Uppal adds,“We feel safer placing orders outside.” He says India does not manufacture man-made fabrics in large variety is another reason extended for importing.
President of Clothing Manufacturers’ Association of India, Premal Udani said, “We are forced to source a number of synthetic fabrics and blends like nylon, viscose polyester and speciality fabrics like fire-resistant fabric from outside as these are not available in India.”
What India lacks in, is the absence of the product value chain like anti-bacterial cotton fabrics that can give a competitive edge. Synthetic fabrics used for making jackets do not find a place in India’s offerings.
The manmade (synthetic) textiles industry at present bears the brunt of biased excise duty structure. Take the case of polyester filament yarns, which attract 24 percent excise duty, while cotton yarn on the other hand attracts only 4 percent basic excise duty.
Various blended synthetic spun yarns also attract more excise duty. Poly/viscose and 100 per cent viscose attract 8 percent, whereas nylon filament yarns attract 16 percent. Manufacturers of synthetic fabric say there are other drawbacks that work to their disadvantage.
Even as the basic raw material for manufacturing synthetic fibre is texturised yarn gets taxed at 24 per cent, the other inputs like foam, scrim, dyestuff are taxed at 16 percent. Due to this a company ends up paying on an average 20 percent excise on inputs.
Now, with the reduction in the excise duty on the finished product fabric from 16 percent to 8 percent, Cenvat claims eligible for it will only be up to 8 percent of the duties paid on the input, foregoing the balance 12 percent.
But, not all seems to be lost as the forthcoming budget is expected to strike parity, and then, man-made fabrics production may take to an upswing for Indian exporters to stop calling China and other countries for fabrics. |
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