Imports of fabrics by China in 2013-14 is Rs 5,500 crore, which is grossly undervalued to the extent of at least 50 per cent. Therefore, actual value will be over Rs 8,000 crore. Imports of fabrics consist of manmade (polyester, viscose and nylon) fibres and yarns as India is the net exporter of cotton yarn and raw cotton to China.
Fabrics considering Rs 5,500 crore imports would have consumed 5,00,000 tonnes of manmade fibres, filament and textured yarns at standard meterage of 10 m per kg. In India, manmade fibres, filament and textures yarns used to weave fabrics for common men and poor attract a mandatory excise duty of 12.5 per cent making it expensive as compared to other fabrics. Manmade fibres, filament and textured yarns cost an average of Rs 100 per kg in India.
Despite having production capacity, India lost production opportunity of 5,00,000 tonne in volume and Rs 5,000 crore in value. This domestic production of fabric would have contributed Rs 625 crore in terms of excise duty alone.
The under-valuation is resulting additional loss of custom revenue.
Revenue alone, the imports have resulted in 50 per cent closure of power looms in Surat, Bhiwandi, Malegaon and Ichalkarangi leading to unemployment of over 1,00,000 workers forcing some of them to commit suicide. About 60 per cent of fabrics is weaved on power looms. Weavers in Bhiwandi has gone on strike and Surat weavers holding on to large scale inventory.
Textile industry is already reeling under slowdown and demand contraction owing to higher excise duty of 12.5 per cent as compared to cotton which has nil excise duty. The long standing demand of industry to reduce the excise duty from 12.5 to 6 per cent may kindly be considered. The extension of excise duty up to yarn stage will benefit the spinning industry and boost government´s revenue.
Immediate steps are needed to increase custom duty in imports of fabrics from 10 to 20 per cent and impose specific duty on all kind of fabrics. There are some tariff lines in fabrics which does not have specific duty. The import of fabric should be allowed under Advanced Authorization Scheme (AAS) scheme only for actual users. The falling Yuan will further aggravate the problems for manmade textile industry which is witnessing worst crisis in last 10 years. It is unable to produce and unable to export. Exports have fallen over 10 per cent and would continue to fall further if situation not arrested soon.