Excise Levy Makes Synthetic Textile Export Uncompetitive, Promotes Imports

Faced with rising import of synthetic yarn largely from China due to cost competitiveness, Indian textile manufacturers have urged the government to exempt excise duty to nullify the price advantage for Chinese exporters.

While synthetic filament yarn enjoys 12.5% of excise duty in India, cotton yarn has no such levy. Thus, cotton yarn import from China remains uncompetitive in India.

With this 12.5% of duty differential, import of synthetic yarn has increased substantially in the last few years. During the last financial year alone, import of synthetic yarn has shot up by upto 25%.

Staple fibres import into India shot up to $196.86 million between April – February period of 2014-15 as compared to $149.11 million in the financial year 2013-14, data compiled by the apex trade Synthetic & Rayon Textile Export Promotion Council (SRTEPC) showed.

In the last two years, Chinese cost of manufacturing has gone up with increased workers’ wages and financial costs. Rising energy cost has also gone raised cost of manufacturing in China. Consequently, export share has gone down by 10-12%.

So, they have vacated a space of $40-50 billion in global markets. But, the capacity additions made in the last two years has resulted into excess availability of synthetic yarn which is currently being dumped into India.

“Because of the contraction in exports and continuous capacity additions in the last two years, China has huge surplus of filament yarn, synthetic staple fibre and other raw materials and fabric of synthetic textiles. Now, rising import is not only idling our domestic mills but also support huge foreign currency outgo. The only way forward, therefore, is to reduce excise duty on all synthetic textile raw materials and fabric to enable Indian producers to grab the global opportunity vacated by China,” said Anil Rajvanshi, chairman of SRTEPC.

China’s vacated space is gradually being grabbed by Bangladesh and Vietnam as India remains uncompetitive in global markets with 12.5% of excise levy.

Apart from fibres, filament and spun yarns import of worth $825 million, India also imported synthetic fabric worth $780 million in 2014-15.

Filament yarn is weaved directly for synthetic saris, dress materials and shifting etc. and therefore, is an item of mass consumption which is produced by over 35 producers in India in small, medium and large segments.

“Rising import has resulted into about 30% looms closing down in major producing centres like Surat. Thus, the industry needs urgent attention,” said a senior industry official.

It is a mass commodity product and thus, sold at cheaper prices as compared to staple fibre which is mixed with cotton and viscose to produce good quality suiting and shirting etc. Thus, PSF is sold at import parity. In India, out of 4 million tonnes of polyester produced, 3 million tonnes is filament yarn.

Source:- business-standard.com