Silk Trade Faces Googly With Duty Drawback Cut

The drawback rates on export of silk goods were more than halved, from Rs 277 per kg of silk content to just Rs 129 per kg, by an order of the drawback commissioner released on October 30. In the case of non-silk goods, the slash has left hardly any drawback on the export item - the revised rate of Rs 37 per kg of silk content is just one seventh of the previous rate.

Drawback is a refund of the incidence of customs duty on silk yarn. The crackdown on the item well after the budget is probably a precautionary measure to check misuse. It can also be a sign of dispute between the silk trade and the department. The entire segment of the industry, starting from fabrics down to made-ups and garments, is faced with the reduction.

Silk fabric exports in ''02-03 were of the order of Rs 1,318 crore. Silk is also a major component in the total furnishings export of Rs 6,144 crore.

Export contracts based on the drawback refunds have lost profitability. The slash to Rs 129 per kg is specially steep when seen in the context of the drawback rate of Rs 325 per kg in the ''02-03 schedule. At one time, the rate was 5.9% of the value of each sq mt.

Trade sources are surprised at the reason behind the slash in rates when they expected a rise to compensate the burden of a stiff anti-dumping duty on raw silk imported from China.