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India : Yarn Prices Stabilise As Cenvat Comes Into Forces |
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2003-6-26 8:36:00
The usual volatility, due to speculation in yarn prices has almost
vanished, thanks to the introduction of Cenvat from April 1, 2003.
Accordingly, the prices of cross range of yarns—processed and unprocessed—have stabilised, traders said.
What is more, with around 10 major fibre manufacturers and 34 yarn makers in India, the industry opinion on near future price trends remains divided.
While one section feels that the prices may remain stable at current low levels, members of the other section say the prices would slide further 10 per cent from the current low levels after the cenvat was introduced. This in turn could result in producers cutting down on their production.
Major yarn makers are RIL, Indo Rama Synthetics, Sanghi Polyester, Modern petro, Rajshree and JBF.
On an average, yarn prices were lowered in the first week of June from about Rs 97 per kg to Rs 92 per kg while that of other synthetic-fibres were reduced to Rs 80 per kg from Rs 90 per kg before Cenvat introduction.
In the last budget, the finance minister had widened the Cenvat network by imposing cenvat in a range of 9-14 per cent on yarns including those manufactured by the powerloom sectors.
The processors with turnover below Rs 30 lakh have the option to
register with the concerned authorities to stay out of the cenvat chain.However, since the yarns are used as raw materials in manufacture of fabrics, the latter demanded the proof of cenvat payment which called for registration. Despite this, industry sources said, majority of the powerlooms owners have not yet registered themselves with the excise authority, and they managed to work without registration.
Before, cenvat levy, local traders and merchants used to speculate the yarn prices, which was causing the fabric makers to streamline the production cost.
Now, as registration is required, gradually this middle-man will be out from the picture as most of the yarn maker will focus on direct
approach to customers, i.e. to fabric makers. Whereas, further the recent reduction in forex prices has also impacted the yarn export. As the rupee has appreciated drastically against the dollar in the last three months and exporters are finding it difficult to maintain their prices in the international market.
Further, the exporters are also upset with the reduction in duty
drawback and imposition of excise and the last thing exporters wanted was a strong rupee, which will once again eat into the exporters margin making them uncompetitive.
This situation has made un-competitive market for yarn exports, forcing Indian producers to sell more in the domestic market. This has depressed local prices.
In addition to that, several exporters who export to EU have been
trying to switch over to the Euro but there is a lot of resistance from the importers.
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