Interview - Mr Om Prakash Lohia, Chairman & MD, Indo Rama Group
fibre2fashion:
With industry, we await that fortunate time. Which all chokepoints need to be considered before anticipating this progress of Indian synthetic fibres industry?
Mr Om Prakash Lohia
There are anomalies in duty structures. Synthetic fibres in spite of being the common man’s fibre is levied 8% excise duty while for cotton it is at 4%.
Customs Duty on the main raw materials for polyesters, Purified Terephthalic Acid (PTA) and Mono Ethylene Glycol (MEG), is zero in neighboring countries like Thailand, Indonesia and Pakistan. Measures should be taken to ensure availability of raw materials and finished products at competitive prices in line with neighboring countries.
Furnace Oil, which is extensively used by manufacturing units to run their DG sets to augment their power requirements, has an excise duty of a staggering 14%. This has a direct bearing on the price of finished goods. Besides, this scenario also generates CENVAT accumulation due to inverted duty structure of 8% on finished goods like fibres and yarns.
While the cost of borrowing for capital expenditures is pretty high, there is no incentive for modernization of manufacturing processes and plants.
fibre2fashion:
In this context, how do you look forward to National Fiber Policy?
Mr Om Prakash Lohia
The differential discrepancy at 4% in the excise duty structures between cotton and polyester still exists. There ought to be a level playing field between all competing fibres, both natural and synthetic.
fibre2fashion:
In our last talk, commenting on future polyester cycle, you had mentioned about the industry’s shift to China and India to be the two most important sourcing destinations for textiles in the post-quota era. In present context, do these countries remain slated?
Mr Om Prakash Lohia
Together, these two countries command more than 70% of the global polyester production. With quota restriction dismantled in January 2009 for China and its alignment with WTO, dynamics of inflows and outflows are expected to change. Still, with capacities already in place, India and China are ideally positioned to take advantage of the rebound in textile demand and polyester in turn.
fibre2fashion:
If compared, same situation of bullish price trend in polyester value chain persist a year back in 2008; does this point up further demand downfall in later 2009 and early 2010? If not, what would be determinants preventing this obvious situation then?
Mr Om Prakash Lohia
Polyester is most economically and favorably placed against fibres like cotton and viscose. The overall cotton production in the current year has reduced as compared to last year and signs are still not encouraging because of unfavorable monsoon. The high cotton prices are hence expected to continue. Viscose prices are also high and have been on the rise. At the same time price of crude oil, of which our main raw materials are derivatives, is stabilizing. With demand for polyester having already picked up in the last few months, we see a stable and comfortable demand situation in the coming quarters.
fibre2fashion:
How is R&D division at Indorama preparing itself to capture nascent and lucrative industry of non-conventional textiles (technical textiles)?
Mr Om Prakash Lohia
At Indo Rama, we have taken a conscious decision to focus more on our niche areas.
fibre2fashion:
Well on that note , ending this talk here, we wish the best for all your future ventures, Mr Lohia! Thanks for your precious time and comments!
Mr Om Prakash Lohia
Thanks!
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