Bangladesh has rejected India's request to notify it as a country from where it imports cotton yarn as input for textile products it exports to the European Union (EU).
"Bangladesh has not accepted India's request," Minister of State for Commerce and Industry D Purandeswari told the Lok Sabha in a written reply on March 4.
India had been requesting Bangladesh for more than a year now to extend the EU's generalised scheme of preferences (GSP) benefits to yarn exporters. If Bangladesh had notified India as a source country for its inputs, under the EU's revised rules of origin, the tariff concession benefits of EU's GSP would have been available to Indian fabric and yarn exporters to Bangladesh.
"The Bangladesh government has not accepted India's request to extend EU-GSP benefits to Indian yarn exporters," a senior commerce department official told Business Standard. "Even though the EU allows Indian fabric to be used for enjoying GSP benefit, Bangladesh has refused to extend the benefits due to pressure from its textile lobby groups."
The development comes in the wake of President Pranab Mukherjee's recent visit to Bangladesh, during which he met Bangladeshi President Zillur Rahman and Prime Minister Hasina, among others.
The issue was also raised during a bilateral meeting between Commerce and Industry Minister Anand Sharma and his Bangladeshi counterpart Ghulam Muhammad Quader in January.
The import of textiles and clothing by the EU from Bangladesh has grown by 29 per cent in 2011 from 2010, according to data by the European Commission.
In 2011, India allowed zero-duty access to Bangladesh except for 25 products which are kept under the sensitive list under the South Asian Free Trade Area Agreement from 480 products.
0Under the EU's GSP, developing countries get preferential access to the EU market through reduced tariffs. The EU grants Bangladesh and 47 least-developed countries duty-free and quota-free access to the EU market for all products under this scheme.
After a recent revision of the scheme in October 2012, the EU has permitted these countries to extend the benefits to those countries also which are involved in supplying raw materials to the country exporting the final product.
The new provisions will take effect from January 2014.
However, India will stand to gain if it is able to successfully conclude the ongoing negotiations to have a free-trade agreement with EU. Once concluded, the pact will enable Indian textile exporters gain preferential access to European markets. Talks to establish the deal had been going on since 2007 and it has missed several deadlines.