March 15, 2002
`19’
DEMAND TO INCREASE IMPORT TARIFFS ON SILK
The Minister of State for Textiles, Mr. V. Dhananjaya Kumar has termed the union budget as progressive, industrial friendly and growth budget for showing ample considerations for textile sector. In a letter to Finance Minister, Mr. Yashwant Sinha, the Minister of State for Textile has urged that the Ministry of Finance should treat silk item at par with plantation items such as tea & coffee and exempt Chapter 50 from the general reduction of peak import tariffs to 30%. Further import duties on silk items may be retained at 35%. Alternative a specific duty of Rs. 350/- per kg or 30% BCD, whichever is higher can be imposed. The Ministry of Finance has proposed to reduce the peak duty of basic customs duty (BCD) on all goods falling under Chapter 50-63 from 35% to 30%. Under chapter 50, silkworm cocoons, raw silk, silk yarn and silk fabrics are all chargeable to 35% duty with SAD (ad valorem) at 4%. The effective rate is, therefore, 40.4% on all items. With the proposed reduction of BCD to 30%, the effective rate would come down to 35.2%, making a difference of 5.2%.
Sericulture being an agricultural activity involving only small & marginal farmers; MOT for State explains that silk reeling is confined to tiny and household industry, and silk weaving is largely a handloom. It is a poverty alleviating and income augmenting activity in several States especially the NE region. Silkworm cocoons are an agricultural product and deserve the same protection as other agricultural or plantation products. Instead, silkworm cocoons have been exposed to further competition. The country has just moved into a large programme for expansion for bivoltine sericulture, in order to produce, the for the first time, internationally competitive quality of raw silk. It is necessary to provide protection for another 2 or 3 years for this programme and prices to stabilize, he appeals.
Silk items were placed under OGL w.e.f. 1.4.2001. Since then, imports of raw silk have registered an increase of 90.19% (from April-October 2001) over the corresponding period last year. Silk fabric import has also shown dramatic increase. At the same time, the prices of imported raw silk are falling drastically. From an average of US$ 23.50 per kg. last year and a peak of US$ 28 per kg, prices have slipped to US$ 17 per kg. This has affected domestic prices adversely. The price of silkworm cocoons (bivoltine) selling at an average high of Rs. 220-250 per kg last year, has now fallen below Rs. 150/- Domestic raw silk has slipped from Rs. 1650/- to less than Rs. 1200/-
Moreover complaints of dumping are also being received. More than 95% of the imported raw silk comes from China whose structure is opaque and from where domestic market prices are not easily available. Effort is being made to obtain prices of Chinese raw silk in other silk markets of the world but it would be difficult to make out a case. The easiest protection to the domestic market is by retaining or increasing import tariffs. There is no WTO binding on silk and, therefore, there is no WTO obligation to reduce import tariffs in Chapter-50.
Mr. Dhananjaya Kumar hoped that the favourable consideration of this proposal will definitely protect the interest of local silk growers and the industry.