Indian clothing manufactures demand tax on Bangladeshi RMG imports | The Daily Star
10:43 PM, May 28, 2020 / LAST MODIFIED: 11:24 PM, May 28, 2020

Indian clothing manufactures demand tax on Bangladeshi RMG imports

Clothing manufacturers in India have asked the government to impose more duty on import of clothing items, especially from Bangladesh, to save their domestic industry.

Rakesh Biyani, president of the Clothing Manufacturers Association of India (CMAI), said in a letter to Indian Textile Minister Smriti Zubin Irani on May 22 that the country's domestic clothing industry is under threat because of duty-free import from different countries including Bangladesh.

Due to the duty-free trade benefit, Bangladeshi garments now account for 34 percent of the total imported garments despite having 12.50 percent countervailing and provincial duty.

Between the fiscal years 2016-17 and 2019-2020, garment import from Bangladesh to India registered 192 percent growth, Biyani mentioned in the CMAI letter.

The Daily Star has obtained a copy of the letter.

Bangladesh has been enjoying duty-free trade benefit to Indian markets from 2011 under the South Asian Free Trade Area (SAFTA) on export of all goods including apparel products, except 25 alcoholic and beverage items.

THE RISE IN BANGLADESHI EXPORTS

Bangladesh's share of the imported garments market in India rose 34 percent in the fiscal 2019-20 from 26 percent in the fiscal 2017-18, the letter said.

It was 33 percent last year.

Recently, garment exports from Bangladesh began increasing due to the stimulus packages, higher demand of Bangladeshi garments and for operations of foreign retailers and brands in Indian markets, according to industry insiders.

Global retail giants like H&M and Walmart have opened outlets in India and started sourcing from Bangladesh, causing a spike in exports.

Moreover, the demand for Bangladeshi apparel items has been rising among the Indian middle-income consumers because of competitive prices.

The shuttering of a horde of small and medium factories all over India for their failure to maintain strict compliance requirements and pay higher wages over the last two years also played a part in the surge in shipments from Bangladesh, insiders said.

Furthermore, the Bangladesh government has been paying four percent cash incentive to garment exporters since 2009 for increasing garment export to non- traditional markets including India.

As a result, garment exports to such markets has since risen to nearly $6 billion from few hundred million dollars in 2008. Bangladesh considers all countries as non-traditional ones except the EU, the US and Canada.

"You are aware that CMAI has for long been drawing the government's attention to the dangers posed by the duty-free imports of garments from Bangladesh, and with it the back-door entry of Chinese fabrics into India -- and its consequent impact on the micro small and medium enterprises…," Biyani said in the letter.

"The significant rate of growth of these imports is well documented, and needs no repetition, except to state that the surge continues unabated..." he also said.

DRAMATIC CIRCUMSTANCES

The CMAI president also said the government has in several times pointed out the various treaties signed with Bangladesh and other SAFTA countries, and that it would be difficult, if not impossible, to dilute the agreements.

"However, we would like to urge you to consider the dramatically changed circumstances prevailing today, in the aftermath of the Covid-19 disaster," Biyani said.

Based on a recent study done by CMAI, it is estimated that the Indian textile industry will see more than 40 percent drop in domestic demand of apparel due to the lockdown as a result of Covid-19, leading to possible downsizing of operations, closure of units and job losses.

In this crisis, it is important to think of innovative ideas and policies to support the industry, the letter said.

Some media reports have appeared suggesting that the Indian government is considering levying an additional Covid-19 Import Duty on certain products.

"We believe that this is an excellent move by the Government, and we urge textiles ministry to extend such an Import Duty on imports of garments and fabrics from all countries, including those with whom we have free trade agreement or zero duty agreements," Biyani added.

This will enable the government to collect approximately $100 – $150 million for its fight against Covid-19 (depending on the quantum of Duty imposed), the CMAI president said in the letter.

"CMAI suggests that such a measure may be undertaken only for a limited period of time of 12 months, after which we can go back to our current agreements in force," Biyani added.

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