Mr. Om Prakash Lohia
Chairman & Managing Director Indo Rama Synthetics (India) Ltd.
Born on 26th May 1949, Mr. Lohia joined the family business of textiles, after graduate from Calcutt
What is your view for the textile sector?
Government is focusing on the job creation potential of the manufacturing sector. Simultaneously, there is emphasis on food processing because 40% of India’s fruits and vegetables get spoiled post harvest. Thus the twin track approach towards improving agricultural productivity to 4% and raising output in manufacturing to 12% annually is the foundation for our country’s quest for double digit GDP growth. Within the manufacturing sector, textiles is the largest job creator and also the industry with tremendous growth potential for both domestic and export markets.
In India, man made fibres have been levied the highest of duties while natural fibres have been commanding markets as well as favorable prices. What according to you can ensure both the sectors survive and thrive complementing each other rather than competing with each other?
Historically, Indian textiles had focused on cotton and even the fiscal regime had an in-built bias against man-made fibres. But if India is to approach anywhere near the targeted export volume of US$ 50 billion by 2010, we shall have to bank on synthetics - for both fibre availability and for aligning our product basket with international demand. Budget 2006 has, to a large extent, removed the duty disparity by bringing down the excise duty on MMF to 8%. This will give a huge boost to consumption of MMF in the downstream segments because synthetics will now be so much more competitive vis-à-vis cotton.
What is your reading of the future polyester cycle?
This is the most important synthetic fibre accounting for 70% of all MMF consumption. Globally, the industry is shifting to China and India, which are slated to be the two most important sourcing destination for textiles in the post-quota era. The industry is sensitive to the swings in the petrochemical cycle, up and down the value chain and, of course, to the crude oil price scenario. There are periods when the upstream raw material (PTA/MEG) producers capture the margins for a few years, prompting huge capacity addition plans. Once these capacities come on stream, the raw material prices ease up and the outlook for the polyester producers look up. We are at just such a juncture where, worldwide, a huge 40% increase in PTA and MEG capacities are scheduled to come on stream beginning Q2 of 2006 and right through the next two years.
Can you tell us about the expansion plans in pipeline for Indorama?
Despite the adverse conditions affecting the polyester industry over the past 18 months, the Company has remained a profitable, dividend paying entity with enough resilience to simultaneously fund an expansion project which will double its capacity. When the expansion comes on stream in phases between July and September ’06, the Butibori plant with 600,000 TPA polyester facility will become one of the largest single location units of its kind in the world. A 30 MW thermal power project is simultaneously coming up at site for captive consumption. The resultant economies of scale are unquestionable but what is perhaps more important is the timing of this expansion. The increased volumes will come to market when significant new PTA capacities will also be available (IOC, RIL, Indo Rama Thailand etc).
How will raw materials prices affect its downstream customers?
The easing of polyester raw materials prices will be concurrent with very large increase in downstream demand due to lowered excise duties on PSF/POY and their consequent competitiveness vis-à-vis cotton. Furthermore, lower customs duty on raw materials will mean relatively better competitiveness for dedicated polyester producers.
Published on: 19/06/2006
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