POLYESTER
FIRMS SEEK IMPORT DUTY CUT ON RAW MATERIALS
After series of initiatives to lower the prices of petro products,
steel and edible oils, the finance ministry may now find it
difficult to defend the higher import duties on polyester raw
materials whose domestic prices are shooting up. Downstream
polyester and blended textiles industries, that consume polyester
staple fibre (PSF), have approached the MoF for a cut in import
duty on PSF to 10% from 20%.
Upstream polyester
producers, including Reliance and IndoRama Synthetics, have
increased the price of PSF since July '03 by 26% to the current
price of Rs 71.5/kg. Against this, PSF is now available through
imports at around $1.2 (CIF) or Rs 56/kg. However, with 20%
import duty on import price and 16% countervailing duty, the
effective import duty on PSF is around 39%.
Thus, the cost
of imported PSF for the domestic user is higher at Rs 77.8/kg.
Currently, imports of PSF into the country are minimal. In
a letter to the finance minister, P Chidambaram, Indian Cotton
Mills' Federation (ICMF) chairman BK Krishnaraj Vanavarayar
said: "Manmade fibres are now being used by poor and
common people and, therefore, need immediate reduction in
prices, which can only be done if the import duties are immediately
reduced."
Domestic PSF producers
are pegging their prices to landed cost of imports, taking
advantage of the tariff protection. In fact, the hike in crude
oil prices has resulted in surge in price of PSF and raw materials
for making PSF namely PTA, DMT & MEG. The import duties
on all these products are at par at 20%, while the duty on
crude oil and naphtha is 5%.
"We request
you to reduce the import duty on raw materials to produce
PSF - PTA, DMT & MEG - to 5% and that on PSF to 10%,"
Mr Vanavarayar said in his letter to Mr Chidambaram. Reliance
is the largest producer of PTA and PSF in the country.
Higher input prices
have already taken the toll in exports of synthetic textiles
from the country, with a decline of over 12% in the first
quarter of the financial year '04-05. "Value addition
has come down due to higher price of PSF. This has hit exports
badly," said Rakesh Mehra, chairman, Synthetic and Rayon
Textiles Export Promotion Council (SRTEPC).
Similarly, rayon
textiles industry demanded that customs duty on viscose staple
fibre (VSF) be slashed to 10% from 20%. Currently, there exists
an inverted duty structure in the viscose sector with the
duty on wood pulp, the raw material for VSF at 5%. Grasim
Industries is the sole producer of VSF.
In fact, Mr Chidambaram
had indicated that the duty on manmade textile industry would
also reduced in the coming budgets, to bring them at par with
the cotton textile industry which has been given the option
of zero excise duty in Budget '04. However, there wasn't any
such commitment on reduction of customs duties on raw materials
such as PSF and VSF.
"The next
step to contain inflation should be a reduction in import
duties on polyester raw materials, whose global prices have
risen sharply in the last one year, allowing the domestic
producers to rake in higher profits and hitting downstream
industries and the consumers," said Mr Mehra.
