The four per cent incentive given under the Merchandise Export Incentive Scheme on made-ups and garments has been withdrawn. This has put India’s textile industry in a fix. Exporters of cotton made-ups are already facing a tough situation financially due to the non-implementation of the Rebate of State and Central Taxes and Levies (RoSCTL) scheme. Nine months after it was first announced, the scheme to refund taxes and boost exports of made-ups and garments is yet to be operational. Exporters are already facing serious working capital problems affecting their day-to-day operations.

While negotiating with importers, Indian textile companies have factored in the four per cent MEIS incentive and RoSCTL scheme which together account for 8.2 per cent of export prices. Export orders have to be executed in the next nine months. With the removal of MEIS benefits, exports at the prices agreed upon will become uneconomical and exporters have to bear huge losses and start defaulting on their bank loans. Many exporters have also paid advance tax on their receivables, which has further aggravated the problem.

Indian exporters are already working against tough competition from Bangladesh, Sri Lanka, Vietnam and Pakistan. High import duties have been levied by the US, EU and China on shipments from India.