INDIA: Silk Exports Hit Due To 14 Months Of Bureaucratic Uncertainty

Entangled in bureaucratic dithering over duty benefits to exporters, Indian silk exports are expected to fall far short of the $430 million target in 2001-02 fiscal.

Silk exports in the first half of the current fiscal, which ended on March 31, was $193 million, down from $250 million in the corresponding period of 2000-01. While in 2000-01 Indian silk exports exceeded the target of $330 million to reach $340 million, the same feat is unlikely to be repeated this year, industry sources say.

India is the second largest silk exporter after China. "On an optimistic note exports to the tune of $330-350 million may be achievable," Indian Silk Export Promotion Council chairman Subhash Mittal said.

"After 14 months of uncertainty faced by exporters over the duty drawback issue, it is back to business. But it is too late to make up for the lost time." In November 2000 the government issued a notification withdrawing the duty drawback to the silk exporters with retrospective effect from the start of the scheme three years ago.

The move created a crisis of sorts, though the government indicated in January last year the possibility of a rethink. After months of discussions, in December, the revenue department allowed the benefit to cover embroidered silk products, readymade items and fabrics.

"While Indian silk exporter were caught in dilemma over the duty drawback issue, much opportunity was lost. Relatively small players in global silk trade like Indonesia and the Philippines were able to score over us in the US," said Jacob Samuel, president of the Indian Silk Exporters Association.

The US accounts for 40 per cent of Indian silk exports, Germany 30 per cent share and Italy 10 per cent. The remaining is spread over other countries.

"It is the embellishments on silk fabrics and readymade garments which help India compete against our main competitor China in the global market. Due to the uncertainty, Indian silk industry has lost a lot of business," said Mittal.

With the restoration of duty drawback benefits to specific silk products, the exports are expected to receive a boost, said Mittal, chairman of Payal International and deals in carpets and silk garments.

Faced with an "uncertain market in the wake of global recession," Samual said around 15 major exporters were planning shows in Frankfurt, Atlanta, Hanover and Paris stretching from January to September to scout for business and study the design trends.

"Only by mid-March we will know the business trend for the whole year," said Samual.

January 9, 2002

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Added: January 9, 2002
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