China yarn spins Indian profits

THE TEXTILE OPPORTUNITY - III

Indian exporters import about 70% of their fabric requirements.

The investments made by the Asian tigers, including China, in fabric capacity, especially man-made fabrics, are working to the advantage of Indian garment exporters.

Leading exporters are currently sourcing almost 50 per cent of their fabric requirement from countries like China, Taiwan, Indonesia and Thailand.

"The value of fabric imports in India was about Rs 1,700 crore in 2003. About 70 per cent of this was used for exports," said Raghav Gupta, principal, KSA Technopak.

The exporters prefer imports because Indian mills, they say, do not have the capacity to deliver huge orders, take longer to deliver and their fabric is 15-20 per cent costlier than fabric sourced from abroad.

"Indian manufacturers still ask for 90 to 120 days' time to deliver 500,000 metres of fabric. Chinese manufacturers are able to supply 1 million metres in a shorter time," Virender Uppal, partner, Richa & Co, said.

The $80-million company imports 25-30 per cent of its fabric requirement for garment exports. "It is unfortunate but we feel safer placing orders outside," Uppal added.

Also, a large variety of man-made fabrics used for fashion garments are not manufactured in India. "We are forced to source a number of synthetic fabrics and blends like nylon, viscose polyester and speciality fabrics like fire-resistant fabric from outside as these are not available in India," Premal Udani, president of Clothing Manufacturers' Association of India, said. Even the much-in-demand finishes in cotton, like anti-bacterial, are not available in India.

"Synthetic fabrics used for jackets are not produced in India. However, we import most of the man-made fabric requirements as they are better in quality and 15-20 per cent cheaper than those available in India," Rajinder Hinduja, executive director of Gokuldas Exports, said.

Gokuldas, the largest Indian exporter of fashion garments, imports 60 per cent of its fabrics, worth Rs 280 crore, from countries like South Korea, China and The Phillipines.

The synthetic textiles industry attributes this to the bias in the existing excise duty structure. As compared to cotton yarn, which attracts 4 per cent basic excise duty, polyester filament yarns attract 24 per cent excise duty.

Various blended synthetic spun yarns also attract more excise. Poly/viscose and 100 per cent viscose attract 8 per cent, whereas nylon filament yarns attract 16 per cent.

Manufacturers of synthetic fabric say there are other loopholes that work to their disadvantage. Though the basic raw material for manufacturing synthetic fibre is texturised yarn is taxed at 24 per cent, other inputs like foam, scrim, dyestuff are taxed at 16 per cent. And a company on an average bears 20 per cent excise on inputs.

Since the excise duty on the end product fabric has been reduced from 16 per cent to 8 per cent, the company can only claim Cenvat up to 8 per cent of the duties paid on the input, leaving 12 per cent unutilised.

However, several of these anomalies are expected to be corrected in the Budget for the next fiscal. And then the production of man-made fabrics in the country might pick up. Till then, Indian exporters will flock to countries like China.

Cheaper abroad

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• The value of fabric import in India was about Rs 1,700 crore in 2003
  
  
• Indian fabric is 15-20% costlier than fabric sourced from abroad
  
  
• A large variety of man-made fabrics used for fashion garments are not manufactured in India
  
  
• The Indian synthetic textiles industry complains of a bias in the existing excise duty structure