Excise reduction propels man-made fibre segment

The reduction in excise duty on man-made fibre segment by Finance Minister P. Chidambaram in this year8217;s budget seems to be bearing fruits for the segment which had been on the receiving end of spiralling oil prices and intense growth in cotton textiles.

The reduction in excise duty on man-made fibre segment by Finance Minister P. Chidambaram in this year8217;s budget seems to be bearing fruits for the segment which had been on the receiving end of spiralling oil prices and intense growth in cotton textiles.

The segment which had seen negligible production growth and decline in exports in the last fiscal has seen a 13.7 per cent growth in production in the first half of this fiscal. man-made fibres and filaments production went up to 1,21,300 tonnes in the first half as compared to 1,06,700 tonnes in the same period last year. In stark contrast the production in 2005-06 grew by only 0.46 per cent and fibre production had actually declined by over 5 per cent.

Clearly, the excise duty reduction from 16 to 8 per cent in Budget 2006 has spurred the industry. The segment had seen a 2 per cent decline in exports in fiscal 2005-06 but in the first quarter of 2006-07 exports were up by over 13 per cent.

8220;man-made fibre has been the only weakling in the value chain but the duty reduction seems to have done the trick and the segment is back on track,8221; said Textiles Minister Shankersinh Vaghela.

The growth trajectory is likely to accentuate further with the onset of winter which is considered a good period for exports. 8220;More than 60 per cent of the global textile market is man-made fibre based and the demand is always more during the Christmas season. With the double digit growth in the 8216;lean8217; first half, the coming months can only mean better performance,8221; said a senior ministry official.

But even with signs of a strong resurgence, some problems refuse to go away. The segment is still at the lower rung in terms of investments and no greenfield project has come up in the recent past. 8220;Investing in man-made fibres involves huge capital and there is uncertainity over oil prices. The raw materials like Terephthalic acid PTA and Mono-ethylene glycol MEG are crude based and though the prices have come down there is no guarantee it will stay at this level in the longer term,8221; said Confederation of Indian Textile Industries secretary general D.K. Nair.

The ministry also admits there is a problem with regard to investments largely due to raw material availability. Pointing at Reliance which is the largest manufacturer of polyester fibres and yarns in the world, Vaghela said that the ministry is trying to ensure availability of fibres and yarns through imports. 8220;Import duty on purified PTA and MEG was lowered last year and we will take a look if there is a need for further reduction,8221; Vaghela said.