MUMBAI, Aug 11: The European Commission on Monday re-opened probes into the exports of unbleached cotton fabrics from India to European countries, sparking a potential retaliation from the Indian government.

The EC initiated the investigation despite last-ditch efforts by the Indian government to thwart such a move. The government is now reportedly preparing to take the matter to the dispute settlement body of the World Trade Organisation.

Major Indian textile companies like Mafatlals, Century Textiles, Coates Viyella, Vardhaman Spinning and Virudhunagar Mills have been selected by the EC as sample firms for the investigation. The sample companies have been asked to furnish details of domestic and export sales within 40 days, sources in the textiles ministry said.

Coimbatore-based Lakshmi Mills and Premier Mills have been identified as firms in reserve in case of non-cooperation from any of the sample companies. A senior textile ministry official is in Brussels for the last two weeks, lobbying for a patch-up formula.

The Commission's questionnaire signals its determination to impose anti-dumping duties. The questionnaire seeks details regarding exports to the European Union in comparison with domestic sales.

Details of cost of production, shipments, accounting procedures, production capacity and employment have also been sought. The Commission has also asked for information on structure of the company with specific queries on major shareholders. The period for the investigation has been extended to the last 18 months from the earlier one year.

The EC has decided to start investigations into the matter for the third time after Euro Cotton, a cotton producers' association, filed a modified complaint just two weeks after the withdrawal of provisional anti-dumping duties in May. Euro Cotton has produced evidence of dumping in June to substantiate its argument.

The association has also threatened to move the European court of justice if the EC decides against the probe.

Euro Cotton has argued that imports from India, China, Turkey, Indonesia and Pakistan were hurting the domestic industry. Employment opportunities in the textile industry have reduced as a result of the increasing imports, it said.The user industry in Europe disagrees with Euro Cotton by saying that rising imports would result in cheaper raw materials.

This would also have a positive effect on the prospects of other business sectors, it argued. The case is expected to test EC's stand on anti-dumping duties in future. If the Commission imposes duties, the issue could provoke a new row among European Union ministers who have divergent views on the issue.

The cotton dispute was forced on to the agenda at the EU ministers' meet in May after former French premier Jacques Chirac promised imposition of duties to European textile giants. But Chirac's attempt was foiled as nine member-nations voted in favour of the duty withdrawal.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.