India may devise a new export incentive scheme especially for the yarn and fabric sector. Exports of cotton yarn and fabrics declined 9.98 per cent and 10.54 per cent respectively in July. There was a 35 per cent decline in cotton yarn exports in the first quarter of fiscal ’20. The Merchandise Exports from India Scheme (MEIS) will be replaced by the Rebate of State and Central Taxes and Levies( RoSCTL) for all exports in a phased manner. RoSCTL will allow reimbursement of duties on export inputs and indirect taxes via freely transferrable scrips. Scrips are incentives that can be used to pay duties. Among textiles, cotton and viscose yarn are suffering. Cotton yarn exports attract five per cent to six per cent of embedded taxes, which are not refunded to the exporters at any stage.

The textile industry wants RoSCTL to be extended to other segments of the textile value chain, which has been in place since March for the apparel and made-ups sector.

India’s textile and apparel trade gap with China, which is also a member of the Regional Comprehensive Economic Partnership agreement, has widened because India is losing its share of cotton yarn to Vietnam and Pakistan due to lower cost.