Chandigarh , 31st August 2020, Increasing Competitiveness of Indian Textiles value chain will be crucial for its growth and garnering higher global market share, more so, in the post-pandemic scenario. The challenge is for making the raw materials available for the entire Textile value chain at competitive global prices. Recently the Government has heeded the industry plea and took a major decision to abolish the anti-dumping duty on PTA, a key basic raw material for polyester staple fibre, in the Polyester, MMF segment.
Government’s this bold and sustainable move on removing ADD on PTA made the entire value chain of Man-made fibre sector vibrant and is unleashing a new growth story of increasing capacity, production, exports and employment. Thus, availing inputs at international prices has helped many of the medium and large Textile units in the Polyester stream to enhance exports and employment and carve out a higher global market share. Hence the Indian MMF segment is able to improve its global competitiveness in the man-made fibre/filament yarn prices. Thus, following similar policy line of making the raw materials made available at international and competitive prices, Government has also
rejected the proposal of ADD on PSF and MEG and thereby created a level playing field in the polyester value chain of man-made segment of the textile stream.
Expecting a similar line of policy move which would ultimately help strengthen Aatmanirbhar Bharat, the industry is eagerly waiting for the removal of antidumping duty on VSF, which would help create a level playing field for the entire textile value chain and spur overall growth and development of the Indian Textiles. This has been one of the important and long standing pleas made by the industry. This important MMF raw material viz., Viscose Staple Fibre (VSF) (HSN Code: 55041000) is still given undue protection by way of anti-dumping duty that seriously affects the entire viscose staple fibre textile value chain. VSF attracts ADD of 0.103 USD to 0.512 USD per kg for the imports even from countries like Indonesia.
In India the Viscose Staple Fibre (VSF) is currently being produced by only one producer. They monopolize the customers with their pricing policy and MSME spinners who don’t have the negotiation power with this monopoly supplier suffer the most. They have been successful in getting Anti-dumping Duty imposed on imports of VSF from all the producing countries – Indonesia, China, Thailand etc. There is no cost disadvantage to them vis-à-vis Indonesian VSF producers rather any additional cost is due to opaque policies, top-heavy management & sluggish business policy.
NITMA supports other Textile associations across the Country and join in their plea for requesting the Government for removal the anti-dumping duty levied on viscose staple fibre that has been in existence for the past 10 years. NITMA is of the view that this grave situation should not be allowed to continue as it have been affecting the power loom fabric exports and making them uncommunicative and difficult to survive. Further, with the growing demand for Viscose fibre in India, the current capacity of the domestic producer is not enough to meet the growing demands of the industry and hence the indigenous producer is adopting import parity pricing while selling the fibre to domestic spinners at a
premium of Rs.20/Kg taking advantage of ADD. This indigenous producer is exporting the same to our competing countries like Bangladesh, Turkey, Nepal, and Sri Lanka at international prices and this discriminatory pricing policy has been seriously affects the competitiveness of the entire viscose-based value chain in India. Our MSME segment, especially the power loom segment is not able to gain advantage of the indigenous fibre. The Competition Commission of India in its order dated 16th March 2020, case No.62/2016 levied Grasim Industries Limited a penalty of Rs.301.61 crores for abuse of dominant position in the market for supply of viscose staple fibre (VSF) to spinners in India and Grasim was found to be charging discriminatory prices to its customers, besides being found to be imposing supplementary obligations upon them.
Having a single supplier has got lot of demerits. The domestic fibre manufacturer adopts a highly complicated domestic pricing policy. They promise discounts to the tune of 40% while withholding mover 1/3rd of it till the year end leading to the blockage of the working capital. They link the discount to the incremental fibre consumption with a one-sided penalty clause and prevent sourcing from other suppliers with an annual contract.
In the recent years, the power loom industry is dependent on imported Viscose Spun Yarn to compete in the global market. The import of Viscose Spun Yarn was 2,022 tons during the year 2016-17 and the same increased to 56,262 tons (over 27 times increase) during the year 2019-20. The opportunity loss incurred during the year 2019-20 due to Viscose Spun Yarn import is estimated at four lakh spindles production capacity worth around Rs.1,000 crores and 8,000 jobs in spinning and also a foreign exchange x outflow of USD 129.15 million.
It is important to note that while the government is encouraging exports of value added textile products by extending various schemes for the textile value chain, the differential pricing policy followed by the indigenous VSF manufacturer makes us lose our competitive edge to other Nations who grab the lion’s share of the export markets for these products. VSF producers in countries like Indonesia supply VSF either at the same price or slightly lower price to encourage value addition, job creation and foreign exchange earnings which is not there in the case of Indian VSF manufacturer.
The entire globe follows the VSF price based on wood pulp prices which have been on the declining trend globally; the indigenous manufacturer always keeps the price much higher than the international price taking advantage of the anti-dumping provision. Even though the domestic producer is planning to add new capacities, they will continue to monopolize the domestic value chain unless ADD on viscose fibre is removed.
Therefore, it is inevitable to remove the ADD on VSF for making the domestic VSF prices aligned with Global VSF Prices. This strategic policy change will certainly shift the entire Indian VSF textile value chain globally competitive and boost production and exports of these products. Government should quickly abolish the ADD in this key segment of MMF value chain for the enhancing competitiveness its products. This move, taken in the larger public interest, will definitely boost overall growth and competitiveness of the entire Indian textile value chain in the near future.
