New Delhi, July 10: The fate of the long-awaited scheme of allowing garment makers to import fabrics free of customs duties, is expected to be decided by the finance ministry in the next few days.

The finance ministry has come into the picture because of the garment manufacturers' demand to permit additional imports of 50 per cent over and above the entitlement allowed under the scheme.

The scheme formulated by the commerce ministry in the face of strong representations from the industry had sought to allow import of fabrics against a prescribed entitlement. Being quantity-based, the scheme was subject to the standard input-output norms.

Also envisaged in the scheme was the flexibility to import trimmings and embellishments to the extent of 20 per cent of the entitlement. The 50 per cent additional entitlement sought by the industry, it was feared, was likely to result in unrestricted import of fabrics which might be sold in the domestic market at fanciful prices without being used for garment manufacture. The scheme could therefore be misused, it was felt. Against this background the commerce ministry decided to remit their scheme to the finance ministry for a final decision. The new scheme is to replace the two special value-based advance licence (VBAL) schemes which were abolished in the wake of the 1997-2002 export-import policy notified on March 31. Those were meant exclusively for the garment exporters. The scrapping of the schemes has thrown out of gear, the plans drawn by the garment industry. One of the two special VBAL scheme was open to both manufacturer-exporters and merchant exporters having an annual performance of Rs 1 crore and above in the preceding licensing year.

It was made applicable only to exports for which payments had been received in freely convertible currency. Eligible exporters were to apply for one or more licences to the extent of their entitlement. The entitlement of a year could be availed of in instalments within a licensing year, but was not allowed to be carried to the next year. Exporters were made eligible to import, without any quantitative restrictions, fabrics to be actually used in the garments to be exported. In addition, they were permitted to import embellishments and trimmings without any quantitative restrictions but within the overall cost of insurance and freight (CIF) value of the licence.If the exporters did not want to import fabrics, they were permitted to import embellishnemtns and trimmings. But in such cases, the value of these were not to exceed 25 per cent of the CIF value of the licence.

The second scheme, it is learnt, was also open to manufacturer-exporters and merchant exporters with an average annual performance of Rs two crore and above in the preceding three licensing years. The only rider was that payments against exports were to be received in freely convertible currency.Licences were issued during a financial year for a value up to 150 per cent of the fob value of exports made in the preceding year.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.