The decision to impose Countervailing Duty (CVD) on garments imported from Bangladesh is being perceived as a game-changer for the industry.
The union budget for 2013-14 has imposed countervailing duty of 12.36% and additional cess of 3% on garments imported from Bangladesh. This was one of the major demands of the knitwear and ready-made garment manufacturers here, who were complaining regularly that the duty-free import of garments from Bangladesh was hurting the Indian industry badly.
The decision to withdraw the central excise duty on branded garments was also a reason to cheer for them.
Now, the industry is hopeful that three factors, including withdrawal of 12.36% of central excise duty on branded garments, imposition of CVD and educational cess would collectively bring about a change in their condition. Chairman of knitwear club, Vinod Thapar said: “The imposing CVD and educational cess on garments imported from Bangladesh will ensure a level-playing field to Indian manufacturers, whose prospects were being hurt due to a tough competition from neighbouring country.”
“Due to some technical reasons the industry came to know about the budgetary decision late,” he added.
The textile industry of Bangladesh was enjoying a duty free access to the Indian market after Prime Minister Manmohan Singh's visit to the neighbouring country in September 2011. The decision had allowed as many as 46 textile items from Bangladesh to hit the Indian market without any duty.
It was a long-pending demand of the Indian manufacturers to impose the duty on Bangladesh garments claiming that the decision was badly hurting their interests by rendering their products uncompetitive in the market in terms of price.
The decision would put a check on invasion of Chinese industry in the Indian market through Bangladesh route as Bangladesh manufacturing industry has been using cheaper Chinese fabrics.
“The subsidy to Bangladesh manufacturers in their country and central excise duty on Indian branded garments here were making Indian products costlier, thereby hurting interests of the industrialists here resulting in decrease in sale,” Darshan Dawar, president of knitwear club said.
President of Ludhiana Knitters Association Ajit Lakra said the decision would help the industry a lot as it was being affected by cheap garments from Bangladesh.
Lauding the decision he said: “This will stop dumping of goods or materials in the Indian market with neighbouring country's material and will push up sale of Indian manufacturers. It will also ensure growth of the industry, which was stopped for quite some time.”
What is countervailing duty?
Countervailing duty is an additional import duty imposed to compensate the effect of concessions and subsidies granted by an exporting country to its exporters. Imposition of countervailing duty is an attempt to bring imported prices to its true market price, and thus provides a level-playing field to importing country's producers.