There are two categories under which used clothes are imported in India: wearable and mutilated. The import of wearable clothes requires licence from the government, with the condition of 100 per cent re-export. This segment constitutes about 30 per cent of the used clothes imports. The import of mutilated clothes, commonly known as the shoddy industry, does not require government approval, and account for nearly 60 per cent of worn clothing imports. The yarn extracted from the mutilated rags and woollens is used to make blankets, sold at around Rs 80-100 in the open market.

The used wearable clothes market

In the three year time period between 2010 and 2013, India's import of used clothes and textile increased by more than 200 per cent-a cause of worry for the domestic apparel manufacturers.

Used wearable clothes enter the Indian retail market by two channels---smuggling from SEZs and by way of paying a paltry penalty of Rs 50 per kg at custom checkpoints. Thus, while new imported garments attract an import duty of 15 per cent, used clothes can be imported at a much cheaper rate. According to domestic apparel manufacturers, as much as 30 per cent of the total imports in the SEZs are sold in the domestic market by way of smuggling.

According to Rahul Mehta, President of the the Clothing Manufacturers Association of India, against the present 22 licenes (20 licences in Kandla SEZ and 2 units in Falta SEZ) for the import of wearable used clothes, the government is now mulling to increase the number to 200-a move that could flood the domestic market with used clothes from the West.

In a letter to the Union textile ministry, the association recently wrote, "We understand that a meeting was held on 4th July 2015 in the ministry of commerce, wherein a decision has been taken to liberalize the import of unmulitalted worn and used clothes by releasing about 200 licenes in all the SEZs in India. The issuance of fresh licences will substantially hurt the domestic textile and apparel industry." According to rough estimates by the association, as many as 5,76,00,000 garments per year, per licensee enter the retail market for resale through illegal channels from SEZs.

Notably, in September last year, the government had relaxed norms on used wearable used clothes by allowing up to 15 per cent of the export surplus be used in domestic market. However, the amendment was withdrawn in January.

The mutilated clothes industry is much more organized. In a research paper titled, The limits of ethicality in international markets: Imported second-hand clothing in India, Lucy Norris, researcher, Department of Anthropology, University College London, United Kingdom, writes, Panipat is the home to the world's largest shoddy wool industry, which supplies, low-quality blankets across India, South Asia and East Africa to the poor, while slightly better versions are commissioned by institutions such as railways, prisons and the army, and are also a staple item in global disaster relief provided by international charities.

source:- business-standard.com