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India:Viscose yarn poducers tied down by
cheap cotton price pressures |
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2005-3-14
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The prevailing lower cotton prices compared to the viscose staple fibre (VSF) has been hurting the yarn producers.
The price pressure being built up may force many VSF spinners to migrate to cotton yarn spinning.
"At least 10-15 per cent of the spinners who used to produce 100 per cent viscose or viscose-cotton blended yarn have chosen to shift to cotton yarn production this year because of the easy availability of cotton and the lower raw cotton prices," said Mr P. Selvaraj, proprietor of a 100 per cent viscose yarn producing company.
Even the international prices heavily tilt in favour of cotton yarn due to softening prices, resulting in lower export of viscose/blended yarn.
According to him, contrary to the general expectation, the Union The reduction in excise duty on polyester filament yarn has not come up to the expectations of the industry as a whole, which sought duties in the range of 8 percent for the VSF industry.
Sadly, the duty continued to remain at 16 per cent, which has led to a situation where the duty on raw material was higher than the excise duty on VSF spun yarn at 8 per cent.
This duty structure that has increased the raw material cost for the non-cotton sector has left viscose yarn spinners showing surplus `Cenvat'''' duty credit, which they cannot utilise.
For a 25,000-spindle unit, the accumulated Cenvat credit stands at around Rs 1 crore, he informs. As for Grasim Industries, coutry''s lone VSF producer, the situation is even worse than that of the VSF spinners.
The company is particularly concerned at the parity between the ''cotton'' chain and that of the ''blended/non-cotton'' chain, which was disturbed by last year''s Budget with the introduction of exemption route for cotton yarn and fabric sectors.
Grasim, informed VSF sources, has the excise duty on VSF down from 16 percent to 8 percent post budget, the same as at yarn stage as it prevails now, has conveyed to the Government that the extent of competitive pressure developed against blended and non-cotton is as high as Rs 10 per kg which is almost 5 per cent of the fabric value.
The company has impressed upon the Government that the price differential will not be sustainable for the highly competitive textile industry.
Along with VSF yarn duty at 8 percent that of spun yarn from 8 per cent to 4 per cent on the lines of cotton yarn and fabrics has been proposed by the company. Alternatively, it had suggested that the
excise on VSF and spun yarn be brought at par. |
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