NEW DELHI, May 22: The European Union (EU) has rejected the European Commission's (EC) move to slap modified anti-dumping duty on exports of unbleached cotton grey fabrics from India and five other countries.

Industry sources quoting reports from Brazil, said the council of EU ministers refused to entertain the modified duty, proposed at the initiative of France, at its meeting in Brussels on Wednesday.

The move comes as a big relief to India as its exports of unbleached cotton grey fabrics amount to Rs 650 crore annually to the European nations.

The EU move could be considered a major diplomatic victory for the government as the union commerce ministry had lobbied hard against the duty, while the Cotton Textiles Export Promotion Council (Texprocil) had engaged a lawyer in Brussels to fight Indian exporters' case.

India had also threatened to stop imports of second-hand textile machinery, which is being mainly exported by the European countries.

The commission had imposed provisional anti-dumping duty ranging between 15.9 per cent and 17.5 per cent on unbleached cotton greay fabrics exports from India. The duty was made `definite' from March 15, though it was reduced to 15.3 per cent at the lower level and 17.2 per cent at the higher level.

Besides India, the countries against whom the duty was slammed include Pakistan, China, Indonesia, Turkey and Egypt. The commission had time till May 20 to get the duty ratified by the 15-member European Union council of ministers but it was rejected on May 15 with nine countries opposing the duty and six favouring it.

Following this, the commission, at the initiative of French president Jacques Chirac, came out with a modified plan as per which, it said, the duty would be imposed for one year instead of five years and it would reviewed next year.

Industry sources said despite two rounds of discussions on May 16, the EU council of ministers failed to reach an agreement on the modified duty, especially with Britain opposing it tooth and nail.

The modified duty proposal was mooted by Chirac as he took it up as a `prestige issue' in view of the impending elections in France. After failing to reach an agreement, the EU council of ministers were given time till Wednesday to come to a conclusion. But with the members unrelenting in their stand, there was no other way but to drop the proposal.

However, as a sop to France, the commission might now impose provisional anti-dumping duty on exports of bed-linen from India, Pakistan and Egypt.

The disclosure of the anti-dumping investigations on bed-linen was expected to be made soon after which the decision on imposing the duty would be taken, according to official sources.

If the provisional duty is imposed, then the affected countries would be asked to explain their stand before a decision on imposing `definitive' duty was taken.

India exports bed-linen to the tune of Rs 450 crore annually and the fear of the commission slapping the anti-dumping duty had led to exports of bed-linen increase to Rs 135 crore during the first three months of the current annual year from exports worth Rs 95 crore during the same period last year. However, the duty on unbleached cotton grey fabrics export has affected their shipments this year.

Anti-dumping procedures were initiated on February 21, 1996, soon after the withdrawal of investigations on a similar complaint. The second complaint was lodged by some of the domestic producers in the European countries who contended that they had been affected by the exports.

The processing units in those countries opposed the duty saying that they would affected as they were the importers of grey fabrics.

They also contended that they could face problems in the long run as such protectionist measures could lead to the affected countries resorting to exports of processed cloth.

While Spain, France, Belgium, Italy, Greece and Portugal supported the duty, The Netherlands, the UK, Sweden, Ireland, Denmark, Finland, Austria, Luxembourgh and Germany opposed the duty.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.