Trade Policy Tariff policy

India & US have reached on an Agreement for reciprocal market access commitments for Textiles and Apparel with the negotiation of the WTO Agreement on Textile & Clothing. It provides elimination of Quota system of Textiles & Apparel from 1st January 2005. Under Indo-US Agreement of 1st January 1995, India agreed to reduce tariffs on Textile & apparel and remove all the restrictions on these products. From 1st April 2000, Govt. Of India reduced tariffs on: . Manmade Fibers & Filament Yarns from 35% to 20% Cotton Yarn from 25% to 20% Spun, Blended, and Woolen Yarn from 40% to 20 % India agreed to bind its tariffs on 265 textile & apparel products (Textured Yarns of Nylon & Polyester, Filament Fabrics, Sportswear, and Home Textiles.) Apparel products are free from Excise Duties & various Taxes.

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Grey Fabrics and certain Cotton Yarns are exempt from basic Excise Duty. Customs duty on Polyester Filament Yarns is reduced from 10% to 7.5%. Duty on other Filament yarns will be remain at 10%. Customs duty on Polyester Staple fibers is reduced from 10% to 7.5%. Duty on other Man Made Staple fibers will be remain at 10%. Customs duty on Raw Materials such as DMT, PTA and MEG reduced from 10% to 7.5%. For Small Scale Industries there is Full Exemption Limit being increased from Rs.1 crore to Rs.1.50 crores. Most of the products fall under HS code 61 and 62 carry an import duty of 56.83% which includes 30% basic duty, 16% additional duty and 4 per cent special additional duty. Excise duty on Nylon Chips has been reduced from 16% to 12%. Optional excise duty on Nylon Fish Net Fabrics is increased from 8% to 12%. Excise Duty Exemption on specified Textile Machinery Items is withdrawn and 8% Excise Duty is imposed. CST rate reduced from 4% to 3% with effect from April 1, 2007. Removal of surcharge on income tax on all firms and companies with a taxable income of Rs.1 crore or less.

Import Licensing:
India has liberalized its Import regime for Textiles and apparel, but some of the part is still limited for market access. Currently, there is no import restriction for yarns & fabrics items. Apparel & Made-up textiles goods require a Special Import License (SIL). Govt. revised Exim Policy on 31st March 1999 by eliminating Import Licensing Requirements for 894 consumer goods, agriculture products and textiles. On 28th December 1999 India and Us signed an Agreement for the elimination of import restrictions of 1,429 agriculture, textiles, consumer goods and apparel. India removed restrictions on 715 tariff items as of 1st April 2000.

Custom Procedures:
Marking, Labeling, and Packaging Requirements: Marking, Labeling, and Packaging Requirements for Textile products are technically complex and difficult to implement. According to textile regulation passed on 22nd july 1998 by GOI, Yarns, and Fabrics to have the statutory markings and these markings should not mislead the consumers. For instance, Cloths must be remarked with the name & address of manufacturer, a description of cloth, sort number, length in

meters and width in centimeters, and washing instructions. The Man made fiber cloth must indicate whether it is made by spun or filament yarn. The month & year of packaging, the exact composition of cloth. The Marking must appear on the face plait of each piece of cloth. The language for marking must be in Hindi and English with international numerals.

EXIM Policies:
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Duty Entitlement Passbook Scheme: DEPS is available for Indian Export Companies and Traders on a Pre-Export and Post-Export basis. Pre-Export credit requires the beneficiary firm has exported during the preceding 3-year period. The Post-Export credit is a transferable credit that exporters of finished goods can use to pay or offset custom duties on imports of any unrestricted goods. Export Promotion Capital Goods Scheme: This scheme is available to export companies and traders who provide the GOI with information about which type of goods and what value of Capital Goods they will import. And they also inform what will be the outcome of export they expect to produce from those imports. Depending upon the export commitment GOI provides them a license to import capital goods duty-free or preferential rates of duty. Pre and Post Shipment Financing: The Reserve Bank of India provides Indian Exporters PreShipment Financing through commercial banks for purchasing raw materials and packaging materials by presenting Letter of Credit. RBI also0 provides Post-Shipment Financing through commercial banks at preferential rates by presenting export documents. Export and Special Economic Zones: Govt. of India has established Export Processing Zones (EPZs) and Special Economic Zones (SEZs). In EPZs units can import goods free of custom duty. There is 5-year tax holiday to any industrial unit in EPZs. Govt. has allowed 100% Fore3ign ownership of units under EPZs and SEZs. The Govt. considers SEZs as foreign territory for trade and tariff purpose. Units under SEZs may engage in Manufacturing, Trading and Services. Units are exempt from routine checking of exports by customs, and they can sell in the domestic market on payment of duty as applicable to imported goods. Duty Drawback Scheme: The basic objective of this scheme is to reduce the indirect taxes on exports. Exporters can get refund of the excise and import duty. Through this scheme they can be more competitive and have more potential market.

Textile Industry concerns

o Indian Textile Industry is highly fragmented Industry that is lead by several small-scale industries. Because of this, there is lack of Industry Leadership. These small companies do not have fiscal resources to invest in technological up-gradation and they are not able to generate economies of scale. This leads to inability to establish a world-class competitive player. Despite many policies Industry is bound with historical regulations that are reason for Complex Industry Structure. Though Industry has cheap and skilled manpower but they are less productive. Industry is unable to generate economies of scale, as a result, it is tough to balance the demand and supply equation. There is lack of technological up-gradation in various steps of value chain that affect the quality, cost and distribution. There are high Costs like, High Indirect Taxes, Power and Interest Rates. Inadequate Research & Development. There is less FDI in this industry that is hurdle to make industry more competitive on global basis. o

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Industry has unfavorable labor Laws. India has disadvantage in terms of Geographic Locations. Because of this there is Global Logistic Disadvantage as shipping cost is higher. There is uneven supply chain model and inbound freight traffic is low which affects cost of shipping. India lacks in various trade memberships, which restrict to tap potential market. Inappropriate energy supplies to rural and sub-urban areas. Industry needs to compete on the basis of Price, Quality and Delivery for the different segments.