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Run-up to the Budget: Man-made fibre

PSF: State of the industry (2000-01)

• Demand for PSF is expected to increase by 7 per cent due to stable economic growth, and an increase in the demand for polyester cotton yarn and 100 per cent polyester spun yarn.
• Imports of PSF are expected to increase due to an increase in domestic demand.
• Exports of PSF are expected to decline given the increased demand in the domestic market.
• During the April 2000 to January 2001 period, domestic prices of PSF declined due to a decline in the international prices.
• In 2000-01, margins of PSF producers have declined by 15 per cent, due to a decline in PSF prices and the relatively stable prices of PTA and MEG.

• Demand for PFY is expected to increase by 8.5 per cent, due to an increase in fabric demand.
• PFY exports are expected to decline, as domestic producers have been focussing on the domestic market.
• Imports are expected to decline as prices of domestic producers are competitive with landed costs.
• During the April-September 2000 period, prices of POY (126d) declined with a decline in international prices and the landed cost of imports. In October and November 2000, prices increased due to an increase in fabric demand.
• In 2000-01, on an average, margins of POY producers are expected to decline by 12 per cent. During the April-September 2000 period, margins declined due to a decline in prices. However, since October 2000, margins have increased.

• Demand for PTA/DMT is expected to increase by 5 per cent, due to an increase in the demand for PSF and PFY.
• Imports of PTA/DMT are expected to decline significantly, due to an increase in production.
• Exports are expected to increase as Mitsubishi Chemicals has been exporting a significant share of its output.
• International prices (cif Mumbai) and landed costs of PTA declined by around 10 per cent in April 2000. In spite of a decline in international prices, landed costs have remained stable since May 2000, due to a depreciation of the rupee vis-à-vis the dollar. As a result, domestic prices have remained stable.
• On an average, margins of PTA producers are expected to increase by 9.5 per cent, due to stable prices of PTA.

• Demand for MEG is expected to increase by 5 per cent, due to an increase in the demand for PSF and PFY.
• Average prices are expected to increase by 6.5 per cent, as compared with those in 1999-2000. (MEG prices were low in 1999-2000.)

• Domestic demand is expected to increase by 18 per cent, in line with the increase in PTA production.
• In the domestic market, supply is expected to increase significantly as compared with that in 1999-2000. Supply is expected to increase due to increased production at Reliance Industries' plant in Jamnagar.
• Imports of PX are expected to be negligible, due to the increase in domestic availability.
• Exports are expected to increase as Reliance Industries has been exporting a significant share of its production.
• In 2000-01, international prices (cif Mumbai) of PX are expected to decline. However, the landed costs of imports are expected to remain relatively stable, due to a depreciation of the rupee vis-à-vis the dollar.

• Demand for VSF is expected to increase by 5.4 per cent, due to an increase in the demand for 100 per cent viscose spun yarn and cotton viscose yarn.
• Exports are expected to increase significantly.
• Domestic prices are expected to increase due to an increase in demand and an increase in international prices.

• Demand for RGWP is expected to increase by 16 per cent, due to an expected increase in the demand for end products, VSF and VFY. Given the expected increase in demand in the domestic market, imports are expected to increase by 82 per cent.
• Domestic prices of RGWP are expected to remain stable. In spite of firm international prices (cif Mumbai) of RGWP, landed cost of imports are expected to increase, due to a depreciation of the rupee vis-à-vis the dollar.
• During the November to January 2000-01 period, import prices of paper grade pulp declined significantly. However, prices of RGWP declined only marginally, due to a deficit situation in the international market.

• In 2000-01, demand is expected to increase by 5.8 per cent, largely due to an increase in the demand for 100 per cent spun yarn.
• During the April to September 2000 period, international prices (cif Mumbai) remained stable. Since October 2000, international prices have declined due to a decline in demand. Since December 2000, domestic prices also declined, in line with the decline in international prices.
• Average margins of AF producers are expected to remain relatively stable.

• Domestic demand is expected to increase by 5.3 per cent, due to the increase in the demand for acrylic fibre.
• During the April to September 2000 period, international prices (cif Mumbai) remained stable. Prices have declined significantly since October 2000, due to low demand in the international market.

• Demand for NFY is expected to increase by around 1 per cent.
• Domestic production is expected to increase, in line with the increase in demand.
• Prices of NFY are expected to remain relatively stable.

• Demand for caprolactam is expected to increase by 5.2 per cent, due to an increase in the demand from NFY and NTY.
• During the April to September 2000 period, international prices (c&f South-East Asia) of caprolactam declined by around 26 per cent. Domestic prices also declined, in line with the decline in international prices.

• A reduction in the import duty: The industry associations have asked for a reduction in the import duty on fibre raw materials, PTA, DMT, MEG and Caprolactam, from 27.5 per cent to 10 per cent; a reduction in the import duty on polymer chips, used in the manufacture of fibre and yarn, to 15 per cent; a reduction in the import duty on catalysts, chemicals and additives used in manufacturing, to 10 per cent.
• Equivalent excise duty on cotton and synthetic fibres: The excise duty on all fibres, cotton or synthetic, to be equivalent, at either 16 per cent or 8 per cent.
• Removal of the surcharge on excise duty: The associations have asked for the removal of the 15 per cent surcharge on the excise duty. (The surcharge had been introduced to fund the subsidy for the Janata Cloth Scheme, which has been abolished.)
• A reduction in the excise duty on PFY: Excise duty on PFY to be reduced from 36.8 per cent to 16 per cent. Imposition of a duty on grey fabrics: At present, no excise duty is applicable on grey fabric. As a result, no countervailing duty has been imposed on imported grey fabrics.

Not available:
1. Prices are for December 2000.
2. Prices are for November 2000.
3. Anti-dumping duty of Rs 21.81 per kg has been included while calculating the landed cost.

Note:
For 2000-01, the landed cost and customs duty includes the SACD of 4 per cent, effective since 1999-2000. In 1999-2000, the SACD was applicable only for non-traders, and hence, has not been included in the customs duty.

Compiled by CRIS INFAC

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Rediff-CRISIL Budget Impact Analysis

Budget 2001

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