While exporters interpreted the term "value cap" as maximum entitlement, the Directorate General of Foreign Trade (DGFT) says it is on the free-on-board (fob) value. Thus the value cap on a shirt at Rs 75 (later changed to Rs 450) and on a pair of trousers at Rs 150 with a credit rate of 20 per cent means imports worth only Rs 15 for a shirt and Rs 30 for a pair of trousers would be duty-free which is ridiculously low. Whereas garment exporters thought it was up to Rs 75 and Rs 150 for a shirt and a trousers respectively that can be imported duty free. But the exporters had to pay dutyon the differential incurring losses.

The Apparel Export Promotion Council (AEPC) and Clothing Manufacturers' Association of India (CMAI) brought this anomaly to the notice of Directorate General of Foreign Trade (DGFT).

And the value cap i.e fob value cap for shirts was raised from Rs 75 to Rs 450 but that for others continues to be the same. "One can not understand the justification behind this move of taking fob price as value cap" says a source at AEPC.

In fact, the DEPB scheme was mooted last year in lieu of duty drawback scheme since under the latter duty drawback of only 17 per cent with maximum of Rs 82 per woven piece and 13 per cent with a maximum of Rs 50 per knitted piece was allowed. Therefore to help exporters of high value items, the DEPB credit was given. This also helped the government since no payments need to be made to the exporters in case of DEPB unlike duty drawbacks. In DEPB scheme, the exporters do not need to pay duties on imports upto certain value. Last year only basic customduty was taken into account for calculation of DEPB credit rates. But now on, special custom duty will also be taken into account.

The DEPB rates for woollen items were raised from 10 per cent to 12 to 15 per cent. Thus, DEPB rate goes up to 15 per cent for 100 per cent woollen worsted yarn (grey as well as dyed) and blankets/blazer cloth/ woollen rags etc. It would be 12 per cent for 100 per cent wool fabric, knitted woollen mufflars, wool blazer, woollen blended cloth, woollen blended shawls, woollen blended yarn. For 100 per cent woollen shawls it would be 14 per cent.

The DEPB credit rates were raised to 16 and 20 per cent for cotton textile items like blouses, children's sweat shirts, ladies garments, socks, sports vests, tracksuits, shirts, jackets, jeans, coats, suits etc.