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Synthetic & blended yarn spinning industry in dire straits
18
Jul '08
Mr. V.K. Ladia, President, ISA (Indian Spinners' Association) has, in a press note issued, stated that the blended and synthetic yarn spinning industry is squeezed between galloping input costs and uneconomic prices of their output, namely, blended and synthetic yarn.

The situation is extremely critical and unless immediate relief is rushed by abolition of import duties and reduction in excise duties on raw materials of the spinning industry, the bleak prospect of imminent closure is staring in the face of the industry.

Referring to the importance of the blended yarn spinning industry in the national economy, Mr. Ladia has observed that there are about 200 mills manufacturing blended and synthetic yarn.

In 2007-2008, out of the total spun yarn production in the country of 3990 million kg, the share of blended and synthetic yarn was 1309 million kg, accounting for 26%. Thus, the blended yarn spinners account for a little more than a quarter of the textile industry in the country.

Obviously, if such a big segment of the industry is in dire financial straits, it will not be possible for the textile industry to achieve the target of creating additional 17.4 million jobs by 2012.

Explaining the critical situation of the industry, Mr. Ladia has, by way of example, referred to profitability results of five leading man-made spinning and weaving industries and stated that there has been practically total erosion of net profits in 2007-2008 with mills reporting a decline in profits by 80 to 99%.

The downslide has further accelerated since April-June 2008 and many leading mills are reporting heavy cash losses. The plight of marginal mills is extremely pitiable and they are gasping for the breath.

Cost escalation:
The devastation of the industry is taking place because raw material prices have gone through the roof. The behavior of domestic price of polyester staple fibre in the recent period has been as under:

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Prices of polyester staple fibre have, no doubt, influenced by skyrocketing of crude oil prices. However, because of the peculiar method of domestic producers to fix price on import parity basis, which gives additional price boost of 28% of FOB price due to the impact of import duty, SAD, CVD, freight and other charges, the domestic price of polyester staple fibre works out much higher than in other competing countries.

For example, prices of polyester staple fibre in China are lower at least by Rs.10/- per kg. Thus, the blended yarn spinners in India are at great disadvantage.

In June 2008, Government has totally abolished import duty on crude oil. Since the downstream industries are unable to absorb the tremendous shock of high crude oil prices, inasmuch as their inputs are crude oil-based, it is necessary to waive import duties on all downstream industries and particularly on polyester staple fibre.

Recently, import duty on cotton has been abolished and hence, abolition of import duty on man-made fibres is imperative for the point of parity.

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