NEW DELHI: As the review of ASEAN-India trade progresses, India's textile association has raised concerns and is calling for immediate government intervention to address the disparity in duties between raw yarn and finished goods. This issue has been adversely affecting the Indian textiles industry.
The Northern India Textile Mills’ Association (NITMA) pointed out that under the India-ASEAN Free Trade Agreement (FTA), raw materials are taxed higher than finished products, making India’s manufactured yarn uncompetitive against imports from ASEAN nations.
According to NITMA, raw materials like Polyester Staple Fibre are subject to a Basic Customs Duty (BCD) of 5.5%, while finished products, such as Polyester Spun Yarn, are imported at zero duty under the current FTA.
India became a strategic partner of the Association of Southeast Asian Nations (ASEAN) in 2012 to enhance its economic and political ties through the "Look East" policy.
The review of the ASEAN-India Trade in Goods Agreement (AITIGA) is ongoing, the industry body warns that failing to rectify this issue will hinder domestic production and favour foreign imports.
In a statement, NITMA claimed that this duty disparity has led to a tenfold increase in finished products over the past 14 years (2010-11). In 2010-11, annual imports totalled 8.4 million kg with a value of USD 24.63 million, which surged to 82.7 million kg with a total value of USD 153.93 million.
“The impact of this duty disparity has been devastating,” said Pankaj Sharma of NITMA. “Data from the Department of Commerce shows an exponential increase in duty-free imports of Polyester Spun Yarn (PSY), which has eroded the market share of Indian mills,” Sharma added.
NITMA has formally requested urgent intervention from the Ministry of Textiles and the Ministry of Commerce and Industry to address the critical "Inverted Duty Structure" that is currently penalizing domestic manufacturers.
A fair tariff regime is essential for India to achieve its ambitious goal of a USD 350 billion textile market and USD 100 billion in exports by 2030, according to NITMA's statement.