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Indian apparel manufactures demand tax on imported Bangladeshi garments

With 181,827 active cases and 5,185 deaths in COVID-19 in India, the apparel manufacturers in India urged the govt. to impose more duty on imported readymade garments (RMG) items from Bangladesh.

In a recent letter by Rakesh Biyani, President of the Clothing Manufacturers Association of India (CMAI), said to Indian Textile Minister Smriti Irani on May 22 that the country’s domestic clothing industry is under risk because of duty-free import from different countries including Bangladesh.

CMAI-impose-duty-on-imported-garments-Bangladesh
Figure: As the global retail giants like H&M and Walmart have opened shops in India and started sourcing from Bangladesh, causing an upward trend of apparel exports.

Under the South Asian Free Trade Area (SAFTA) agreement, Bangladesh has been enjoying duty-free trade benefits to Indian markets from 2011 on the export of all goods including RMG products.

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

“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.

He continues, “The significant rate of growth of these imports is well documeted, and needs no repetition, except to state that the surge continues unabated.”

The CMAI president also said the government has 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.

“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.”

Rakesh Biyani, President of the Clothing Manufacturers Association of India (CMAI)

“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 a 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.

In FY 2016-17 and 2019-2020, apparel import from Bangladesh to India registered 192 percent growth, Biyani stated in the CMAI letter. And in the last FY, an increase of Bangladesh apparel to India rose 33%.

Some media reports have suggested 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 12 months, after which we can go back to our current agreements in force,” Biyani added.

As the global retail giants like H&M and Walmart have opened shops in India and started sourcing from Bangladesh, causing an upward trend of apparel exports.

Not to mention, due to the competitive prices of ‘Made in Bangladesh’ made garments the demand for Bangladeshi apparel items has been rising among the Indian middle-income consumers.

Behind the scenario, numerous garment factories across India have failed to maintain strict compliance requirements and pay higher wages over the last two years played a crucial part in the surge in shipments from Bangladesh, insiders said.

Besides, the Bangladesh government has been paying 4% cash incentive to RMG exporters for increasing garment export to non- traditional markets including India.

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