Reliance first off the mark, cuts POY prices

Duty cut to boost synthetic textiles sector

The excise duty reduction on polyester, nylon chips, textile fibres, yarns and intermediates, fabrics and garments to 15 per cent from 20 per cent in the Union Budget 2005-06, has brought relief for the huge mass of middle class population, who use clothing made of synthetic yarn.

Since the man-made and blended fabrics, account for over 60 per cent of the total fabric consumption in the country, high duty on synthetics was a heavy burden not on the producers, but on the common man, because it was the final consumer who was burdened with higher excise duty.

With a change in the duty structure, polyester major Reliance Industries (RIL) has reduced the prices of partially oriented yarn (POY) by Rs 6,000 per tonne, others such as Ramkrishana Filaments and Afris Garden Silk among others are also planning to do so.

"With the announcement of reduction in excise duty on POY, we have reduced the prices of POY from Rs 87-89 per kg to Rs 81-82 per kg. The man-made fibre exports are the fastest growing segment of India's total textile exports. Blended and synthetic textiles are the areas where India may increase its share of the international trade," said a senior official of RIL.

Reliance is also building additional capacity by investing in its polyester staple fibre (PSF) and polyester filament yarn (PFY) plants in Gujarat. Other players such as Gupta Synthetics, Orange Petrochemicals and Sabnam Polyesters are planning to set up new units.

Arun Jariwala, chairman, The Surat Art Silk Cloth Manufacturers Association, said, "The reduction in duty on polyester filament yarn from 24 to 16 per cent, and the option to the independent texturisers to avail the exemption route or pay eight per cent excise duty with Cenvat credit, would help the textile industry a great deal, provided the benefits of the duty reduction are passed on to the weavers. The demand in the textile industry has been slack since the last two-three months, but we believe it should pick up in the coming weeks."

Looking to the emerging potential and untapped market, both in India and abroad, many polyester texturising units in Gujarat have already started importing second-hand POY plants from China, Korea among others. Surat alone accounts for over 40 per cent of the country's synthetic industry.

"The Budget has been very good for the textile industry. In view of the reduction in the duty on polyester filament yarn, like other majors, we too have passed on the entire benefit to our customers. The industry is hopeful that the duty cut, and the subsequent price reduction, would lead to a jump in the demand. This has not happened as yet, but we are confident that the things would change for the better in the near future," said an official of Garden Silk Mills.

"With the popularity of texturised yarn and on-going technological evolution, the share of polyester oriented yarn (POY) is over 90 per cent in total polyester filament yarn (PFY) production. The texturised and twisted yarn made from POY is used for suiting, shirting, ladies garments, sarees, upholstery, causal wear amongst others, giving a cotton type look and feel," Chandan Chatterjee, general manager, technology and projects, Industrial Extension Bureau (Indextb), a Gujarat government enterprise, told Business Standard on Wednesday.

"Since polyester fabrics are consumed by the less affluent section of the society, the high excise duty was a burden on the masses, particularly on the womenfolk as they consume fabrics made out of polyester filament yarn in the form of saree and dress material," Chatterjee added.