It is aimed at curbing quota trading and better
utilization of available ceilings to enhance proceeds from export of textile products
By SHABBIR H. KAZMI
Jan 03 - 16, 2000
The Ministry of Commerce has announced the
Textile Quota Policy for the year 2000 with special focus on allotment of quota on
performance basis and curb trading of quotas. The new policy envisages some changes in the
mechanism of flexibilities. Commerce Minister, Abdul Razzak Dawood said that the
government is planning to formulate a long-term textile policy to face the challenges of
globalization and the impending quota free trade regime.
Reportedly the policy for the year 1999 has worked satisfactorily and
it should be continued for the next year. However, exporters were not in favour of
auctioning the growth quota. The practice was opposed on the ground that auctioning will
cause speculation and enable non-exporters to make exorbitant profits without actually
exporting the merchandise. Trading in quota affects the competitive ability.
Long-term and stable policies are the basic requirement of businesses
which have to make strategic decisions for investment with the expectation of earning a
reasonable profit on it. Many business ventures in the country have failed because of
frequent changes in policies affecting the economic fundamentals.
Individual exporters, however, will only be allowed use of these
flexibilities after physical shipment of at least 70 percent of their quota entitlement in
each category. It means that during the year the performance will be the basis for
utilizing flexibilities including swing and shifts, etc., and not the entitlement. In case
of the European Union, use of exceptional flexibilities by exporters will be subject to
shipment of at least 70 percent of their quota by September 30, each year at the latest.
The flexibilities will be calculated on the basis of quota available in the passbook on
the day it is requested for by the individual exporter and not the entitlement at the
beginning of the year. The transfer of quota will be taken into account while calculating
the flexibilities of individual exporters after deducting quotas transferred. The actual
entitlement of flexibilities will be calculated on the basis of quota in the passbook at
the time of application of which at least 70 percent must have been shipped by the
First-come first-served (FCFS) policy will be followed for allocation,
both for reservations as well as postshipment, in the following ratios: 70 percent in each
category placed on the FCFS will be allocated to exporters after they have made shipments
and balance 30 percent of quota in each category placed on the FCFS will be available for
reservations. This will be based on the following conditions and rates of bank guarantees.
These are: a) for shipment within 60 days provided an irrevocable Letter of
Credit/contract is produced, the bank guarantee equal to two percent of the FOB value of
the quota being reserved, b) for shipment within 90 days, bank guarantee equal to five
percent of the FOB value of the quota being reserved, (c) for shipment in 120 days bank
guarantee equal to 7.5 percent of the FOB value of quota being reserved. No extensions
will be granted. The last date for shipment in each case will be October 31. At the expiry
of the reservation period or the deadline of October 31, whichever comes earlier, the bank
guarantee will stand forfeited and the quota would revert to the FCFS pool.
Exporters who are given new category passbook with the transferred
quota will have to ship at least 90 percent of the quota transferred-in. Transfer-out from
new category passbook in such cases will not, in any case, be allowed above 10 percent of
the total quota.
To make Textile Quota Management Policy effective and efficient, the
number of textile associations handling quota categories will be reduced. Effective from
2001, only those textile associations which handle 15 percent of the quota in any category
will be allowed to operate in these categories. Any association which does not handle 15
percent or above of quota in particular category will cease its functions in that
category. The exporters in such a case would have to process their cases through those
associations which will be permitted to handle quota categories under the revised
criteria. The government may also consider allocation of quota for value-addition in 2001.
The actual percentage of such quota, the criteria for eligibility of
exporters to such quotas and other terms and conditions will be notified by the government
through separate public notices which will offer equal opportunity to all exporters to
become eligible for additional quota under this scheme. To check any malpractices in quota
allocations, distributions and utilisation, audits will continue and will be made more
effective under the supervision of the government.