Owing to the US-China trade war as well as free trade agreements with ASEAN countries that allow duty-free imports into the country.
Imports of cheaper yarn from countries such as China and Indonesia are hurting India’s second largest employer, the textile industry, and a large number of small and medium yarn producing units are on the brink of closure, said experts.
Owing to the US-China trade war as well as free trade agreements with ASEAN countries that allow duty-free imports into the country, viscose staple fibre (VSF) yarn imports have surged about 200% year on year in the first five months of this financial year, touching a record 8,029 tonnes in August for an average monthly demand of 50,000 tonnes. China, with its excess capacity, has been at the forefront of exports, followed by Indonesia, driving down the price of VSF yarn to Rs 160-165 per kg from the highs of Rs 190-200 six months ago.
At the same time, demand for the yarn has remained steady, growing at a compounded annual growth rate of 14% in the past five years. An industry insider said that excess capacity in China is more than the Indian demand for the fibre and with so much oversupply through cheaper imports, domestic manufacturers are forced to match the low price that is taxing them heavily.
There is currently a 5% duty on imports of VSF yarn and the industry is pleading to have government increase this to 10-15%. “These are not easy days. There is at least one month of unsold inventory across spinners, large and small,” said Ramesh Natarajan, secretary of Indian Manmade Yarn Manufacturers Association.
“People are contemplating production offs of one-two days a week and our only plea is for the government to step in urgently and increase import duty on VSF yarn from 5% to at least 10% to give a level-playing field to the industry.”
In the entire textile value chain, only fibre makers and end-users like brands belong to an organised industry. There are around 600 small, micro and medium enterprises engaged in the spinning of yarn, which is used to make a fabric that finds usage in garment-making.