section ii: man made fibres -...

SECTION II: MAN MADE FIBRES

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TABLE OF CONTENTS

SUMMARY – MAN MADE FIBRES ..................................................................................................... 112

2.1. INDIAN SCENARIO ...................................................................................................................... 120

IMPORTANT MMF PLAYER IN THE WORLD .............................................................................. 120

CHANGING FIBRE COMPOSITION ............................................................................................. 120

POLYESTER ACCOUNTS FOR LARGEST SHARE IN MMF ...................................................... 122

EXCESS CAPACITIES .................................................................................................................. 122

LIMITED NUMBER OF PLAYERS ................................................................................................. 123

RAW MATERIALS AVAILABILITY ................................................................................................. 123

PRICE MOVEMENT OF MMF ....................................................................................................... 125

EXPORTS OF MAN-MADE FIBRES RISE SUBSTANTIALLY IN POST QUOTA PERIOD BUT

SLOW DOWN IN FY09 .................................................................................................................. 125

POLYESTER STAPLE FIBRE ....................................................................................................... 127

VISCOSE STAPLE FIBRE ............................................................................................................. 127

ACRYLIC STAPLE FIBRE ............................................................................................................. 128

POLYPROPYLENE STAPLE FIBRE ............................................................................................. 129

POLYESTER FILAMENT YARN .................................................................................................... 129

VISCOSE FILAMENT YARN ......................................................................................................... 130

NYLON FILAMENT YARN ............................................................................................................. 131

POLYPROPYLENE FILAMENT YARN .......................................................................................... 131

DYNAMICS OF VALUE ADDED MMF TEXTILES ........................................................................ 132

FUTURE DEMAND FOR MMF ...................................................................................................... 133

2.2. GLOBAL SCENARIO ................................................................................................................... 136

COMPOSITION OF MAN-MADE FIBRES ..................................................................................... 137

REGIONAL COMPOSITION .......................................................................................................... 138

2.3. ISSUES AND CONCERNS ........................................................................................................... 141

EXCISE DUTY ANOMALIES ......................................................................................................... 141

CUSTOMS DUTY ANOMALIES .................................................................................................... 142

DELAY IN GETTING DRAWBACK /EXCISE REBATE CLAIMS ................................................... 143

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CONCERNS ABOUT ANTI DUMPING DUTIES............................................................................ 144

LOWER EXPORT BENEFITS FOR STANDALONE GARMENT MANUFACTURERS ................ 144

CONCERNS ABOUT GST ............................................................................................................. 145

NIL INDIGENOUS PRODUCTION OF SPECIALISED MMF ........................................................ 145

LIMITED NUMBER OF MMF PLAYERS ....................................................................................... 145

LACK OF COMPETITIVENESS IN EXPORTS ............................................................................. 147

EXPORTS DISADVANTAGE AGAINST COTTON TEXTILES ..................................................... 148

HIGHER EXPORT PRICES OF INDIAN EXPORTERS ................................................................ 150

LACK OF INCENTIVES FOR EXPANSION .................................................................................. 151

RAW MATERIAL AVAILABILITY ................................................................................................... 152

COST RELATED ISSUES ............................................................................................................. 153

HIGH TRANSACTION COSTS ...................................................................................................... 154

SUMMARY ..................................................................................................................................... 156

2.4. RECOMMENDATIONS ................................................................................................................. 157

FISCAL MEASURES ..................................................................................................................... 157

NON-FISCAL MEASURES ............................................................................................................ 161

2.A. ANNEXURE .................................................................................................................................. 164

TEXTILE OVERVIEW AND POLICIES IN MAJOR COUNTRIES ................................................. 164

DEMAND PROJECTIONS ............................................................................................................. 172

DEMAND PROJECTIONS FOR MAN-MADE FIBRES ................................................................. 174

FUTURE DEMAND PROJECTIONS VIS-À-VIS EXISTING CAPACITIES ................................... 177

ALTERNATIVE SCENARIOS ........................................................................................................ 178

INVESTMENT REQUIREMENT .................................................................................................... 179

STATISTICAL APPENDICES ........................................................................................................ 181

CONSTITUTION OF SUB-GROUP ON MAN-MADE FIBRES ...................................................... 194

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SUMMARY – MAN MADE FIBRES

I. Ministry of Textiles, Government of India constituted a working group to formulate a Comprehensive

Fibre Policy for Textiles and Garments sector of India with a view to render Indian textiles and

garments sector competitive in the global market in the near, medium as well as long-term. One of the

sub-groups formulated under the working group was on synthetic fibres. The scope of the sub-group

was extended to “man-made fibres” as synthetic fibres would exclude cellulosic fibres like viscose.

Further, “Man-made fibre” was understood to include “filament yarn” along with staple fibres.

Speciality fibres for technical textiles have been excluded from consideration as a separate sub-group

is looking into the same.

II. The key objectives of the study done for the sub-group on Man-made fibres were:

i. To assess the reasons for consumption pattern of man-made fibres (MMF) in India being

different than the world trend

ii. To study the reasons for low consumption of MMF in domestic and export market

iii. To assess the demand-supply and projections for MMF for year 2015 and 2020

iv. Formulating policy interventions and recommendations

INTRODUCTION

III. India is the second largest producer of man-made fibres in the world (World Fibre Report 2008) with

presence of large plants having state-of-the art technology. MMF textiles constitute almost two-third of

the domestic textile market. However, India’s share in global exports of value-added textiles of man-

made fibres is miniscule at around 2.25% in 2008 (India’s MMF exports were US$ 3.3 billion as

against global exports of US$ 146.7 billion). Further, while textiles made of man-made fibres

constitute around 63% of the world trade, it is mere 16.4% (FY09) in case of India as Indian textiles

exports are predominantly cotton based.

IV. The domestic fibre consumption ratio in India at present is 41:59 (FY09) between man-made fibres

and cotton, while it is almost 60:40 globally. The global fibre consumption trend in future is likely to

further tilt in favour of man-made fibres as there is a limitation to growth of cotton on account of limited

availability of land for cotton cultivation. Moreover, the land available for cotton is gradually declining

on account of rise in cultivation of food crops. Given the future demand is expected to be largely in

favour of man-made fibre based textiles, special attention is required to boost the consumption and

production of man-made fibres in India.

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V. Further, Indian textile industry is an export intensive industry, with almost one-third of domestic

production being exported. Thus, in order to maintain high growth of exports in future, India’s textiles

exports portfolio needs to have a balanced fibre mix in line with the global consumption pattern.

PRESENT SCENARIO

VI. India’s capacities for man-made fibres currently stand at 3.4 billion kg, which is around 6.6% of global

MMF capacities. India’s total production of man-made fibres stood at 2.5 billion kg in FY09, of which

exports constituted 10.3% at 0.25 billion kg. Domestic consumption for man-made fibres during FY09

stood at 2.4 billion kg, of which imports constituted roughly 5% at 0.12 billion kg. Indian man-made

fibre industry is largely polyester dominated, which constitutes over 83% of total man-made fibre

production. Further, production of man-made fibres in India is characterised by limited number of

players having a dominant share in the production of most of the man-made fibres and filament yarns.

VII. Although Indian players manufacture most of the man-made fibres (PSF, VSF, ASF, PPSF, PFY,

VFY, NFY, PPFY), the specialised man-made fibres like acetate fibre/ filament yarn, tri-acetate fibre/

filament yarn, cuprammonium filament yarn, nylon 66, nylon 11, spandex, PVA fibre and filament yarn,

PBT yarn, modacrylic staple fibres and PTET are not being manufactured in India.

VIII. While man-made fibre production is highly concentrated, with limited players engaged in

manufacturing of MMF, the value added MMF textiles are primarily being manufactured in the

decentralised sector, with presence of large number of small and medium enterprises. Production of

MMF fabrics has grown from 21 billion square meters in FY05 to 23.9 billion square meters in FY09.

While in the domestic market, MMF textiles and garments are dominant, cotton textiles are

predominant in the export markets; MMF garments are predominant to the extent of 65% (estimated)

in the domestic market, while in the export market cotton garments are predominant with over 80%

share.

FUTURE PROJECTIONS

IX. A top down approach has been followed to determine the future demand for man-made fibres in FY15

and FY20. Considering future GDP growth of 8%, the domestic demand for man-made fibres/ filament

yarns is estimated at 3.9 billion kg in FY15 and about 6 billion kg in FY20. Adjusting to this the likely

exports and imports of MMF, the overall MMF requirement is estimated at 4.2 billion kg for FY15 and

6.48 billion kg for FY20. This implies capacity additions of about 1.8 billion kg (FY15) and 4.6 billion kg

(FY20), which would require an investment of over Rs 90 billion (approximately US$ 2 billion) by FY15

and Rs 230 billion (approximately US$ 5.1 billion) by FY20.

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ISSUES AND CONCERNS

A. Exclusively affecting MMF and MMF textiles

X. Excise duty discrimination: A major concern area has been the historical discrimination of man-

made fibres and textiles against cotton and cotton textiles in the form of higher excise duties. Although

there has been substantial reduction in excise duties on man-made fibres and textiles during the last

10 years, the current duties on MMF and MMF textiles are still high; while cotton is exempt from

excise duty, MMF attracts excise duty of 8%. Further, while MMF textiles attract a mandatory

CENVAT of 8%, cotton textiles have an optional CENVAT of 4%. Any reduction in excise duties on

MMF and MMF textiles will have a highly positive impact on the growth of MMF consumption.

XI. Lack of global competitiveness: Indian man-made fibres textile industry has not been able to create

a mark in the global textiles market post dismantling of textile quotas even though cotton textiles

industry has witnessed a substantial growth. Since dismantling of quotas (2005 onwards), Indian

cotton apparel exports to the world have grown at about 10.7% CAGR, while MMF apparel exports

have witnessed a decline.

XII. Limited number of players: There are only a few big players manufacturing man-made fibres in

India. The industry follows a pricing policy on import parity basis at landed cost. User industry has

submitted that MMF producers export man-made fibres at lower prices than in the domestic market.

This submission is supported by SRTEPC exports data analysed by FIASWI in respect of polyester

fibre and yarn.

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Exhibit I: Share of manufacturers in MMF production

Fibre Manufacturer Installed capacity in

T.P.A (as of 31/3/2009) Production M.T.

(FY09P) % share

(Production)

VSF

Grasim Industries

Others

Total

359,975

58,700

418,675

232,746

-

232,746

100.0

-

100.0

PSF

Reliance Industries

Indo Rama Synthetics

JCT Fibre

Others

Total

550,000

263,550

128,612

240,568

1,182,730

478,959

136,440

55,616

79,094

750,109

63.9

18.2

7.4

10.5

100.0

ASF

Indian Acrylic

Pashupati Acrylon

Vardhman Acrylics

Others

Total

45,000

30,000

18,000

60,000

153,000

34,310

26,512

18,690

-

79,512

43.2

33.3

23.5

-

100.0

PPSF

Zenith Fibre

Others

Total

3,900

4,800

8,700

3,430

-

3,430

100

-

100

VFY

Century Rayon

Indian Rayon Corporation

Kesoram Rayon

Others

Total

25,000

16,400

6,500

32,200

80,100

17,332

16,624

7,605

858

42,419

40.9

39.2

17.9

2.0

100.0

PFY

Reliance Industries


JBF Industries

Others

Total

670,900

259,000

144,000

939,588

2,013,488

639,973

210,092

139,552

342,471

1,332,088

48.0

15.8

10.5

25.7

100.0

NFY

Century Enka

JCT

Gujarat State Fertilizers

Others

Total

125,200

14,000

6,000

164,244

309,444

12,519

11,373

4,171

6

28,069

44.6

40.5

14.9

0.0

100.0

Source: Office of Textiles Commissioner

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XIII. Levy of anti-dumping duties: Indian MMF textile manufacturers are also faced with higher fibre

prices as against their global counterparts on account of levy of anti-dumping duties on imports of

majority of man-made fibres. This in turn affects the availability of fibres to MMF textile manufacturers

at competitive prices.

XIV. Lack of indigenous production of specialized MMF: Various specialised man-made fibres (like

acetate/ tri-acetate, cuprammonium filament yarn, nylon 66, nylon 11, spandex, etc) are not being

manufactured in India despite having huge potential and thus have to be imported by the weavers.

XV. High customs duty: Another factor that has contributed to higher costs of man-made fibre

manufacturers and thus for man-made fibre textile manufacturers is the high customs duty on certain

raw materials required for man-made fibre industry. Certain raw materials and additives used in the

production of man-made fibres are necessarily imported on account of limited domestic production/

lack of requisite quality. Some of these raw materials and additives like rayon grade wood pulp (used

for manufacture of viscose fibre), titanium di-oxide and spin finish oil (used as additives for

manufacturing polyester) attract high customs duty, while the same are either exempted or have lower

customs duty in major competing countries. To enable a level-playing field with the global

counterparts in the international export markets and to reduce the key input costs of man-made fibre

manufacturers, it is desired that customs duty on such inputs are exempted. Since these items are

largely imported due to shortage in domestic market, reduction in import duties on same is not likely to

hurt the domestic manufacturers of these items.

XVI. High debt servicing cost: Another reason for relatively higher costs of man-made fibre/ filament yarn

manufacturers vis-à-vis the cotton textile manufacturers and global counterparts is the high debt

servicing costs of the former. The lending rates in India are in the range of 11% - 13.5% (IBA Website)

and are significantly higher in comparison to competing countries like China (5.04 – 6.12% ; Source :

Bank of Communication, China) and South Korea (5.72 – 6.33%), which contributes to much higher

interest costs for Indian MMF manufacturers vis-à-vis counterparts in competing countries. Further,

concessional schemes like TUFS is not applicable for manufacturing synthetic fibres, which puts this

capital intensive MMF industry at a great disadvantage vis-à-vis the cotton textile industry.

XVII. GST issues for textile industry: Major tax reforms are expected in the form of Goods and Services

Tax (GST), which is likely to be introduced next year. However, textile industry has a major concern

with respect to GST. The textiles industry involves a lot of inter-state transfers especially at the fabric

stage. Due to long supply chain in the textile industry involving traders in various cities, towns, etc, the

inter state transactions are likely to take place among the organised players who are above the

threshold limit for GST exemption and small decentralised traders who are exempted from payment of

GST. Consequently, the regular payee (one above threshold limit) would not get any credit for

purchases from small decentralised trader but shall have to pay full duty on the sale price. Thus, the

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tax will multiply and the purpose of VAT principle would be broken. This would have serious cost

implications to the Indian textile industry, which is predominantly in the decentralised sector.

B. Industry neutral issues

XVIII. There are various other factors contributing to higher costs of Indian MMF and MMF textile

manufacturers vis-à-vis global counterparts, including high power costs and high transaction costs.

Indian industries (including textile industry) face a major disadvantage against countries like China

and countries in South East Asia in terms of power costs and availability. Moreover, Indian exporters

are faced with huge transaction cost burden in comparison with exporters in competing countries. For

instance, transaction costs for exports in India stands at US$ 945 per container as compared to US$

500 per container for China. The un-neutralised state taxes such as CST, VAT, Octroi, etc contribute

to higher transaction costs for Indian exporters. To mitigate the cost burden of Indian textile players, a

long term solution is required with respect to strengthening of physical infrastructure and introduction

of tax reforms.

RECOMMENDATIONS

XIX. To meet the objectives of attaining high growth and increasing the competitiveness of Indian textile

industry (including MMF textiles), the national fibre policy needs to lay a special emphasis on

improving the competitiveness of Indian man-made fibres and textiles industry as it can drive the

growth of the Indian textile industry in the future, both in domestic as well as export markets. This

requires addressing of issues and constraints faced by the industry at present and make suitable

provisions to avoid any foreseeable hurdles in the future.

XX. The key recommendations arrived from this study for incorporation in the National Fibre Policy are:

1. Have a fibre neutral excise policy; i.e. all textiles and fibres should attract the same excise

duty i.e. 4% optional

2. Excise duty and customs duty exemption for specialised MMF which are not produced

indigenously. Such specialised fibres are listed below:

a. Acetate fibre (HS code – 55049010)

b. Acetate filament yarn (HS code – 540342)

c. Tri-acetate fibre (HS code proposed - 55049011)

d. Tri-acetate filament yarn (HS code proposed - 54033310)

e. Cuprammonium filament yarn (HS code – 54033910)

f. Cuprammonium fibre (HS code proposed – 55049040)

g. Nylon 66 (HS code proposed – 55031110, 54025110)

h. Nylon 11 (HS code proposed – 55031120, 54025120)

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i. Spandex fibre (HS code proposed- 55039030)

j. Spandex filament yarn (HS code – 54024400)

k. PVA fiber (HS code proposed – 55039030)

l. PVA filament yarn (HS code proposed - 54026960)

m. PBT yarn (HS code proposed– 54026970, 55039040)

n. Modacrylic staple fibres (HS code proposed - 55033010)

o. Modacrylic filament yarn (HS code proposed – 54026940)

p. PTET (HS code proposed – 54026980, 55039050)

3. Removal of 4% Special Additional Duty (SAD) on imports of man-made fibres to make the

same available to domestic consumers at competitive prices.

4. Customs duty exemption on certain raw materials and additives that are primarily imported

a. Customs duty on rayon grade wood pulp (HS Code 47020000) to be exempted (from

current 5%)

b. Customs duty on titanium di-oxide (Anatase grade) with HS code 283230030 to be

reduced to nil from current 11%.

c. Customs duty on Spin finish oil to be reduced to nil from current 8%. Specific HS

codes for Spin finish oil have already been proposed by the industry (HS code

34031200) and endorsed by the Department of Chemicals and Petrochemicals for

this purpose.

5. Export oriented incentives should be provided to manufacturers of MMF textiles and garments

for a limited period to neutralize the impact of cost-disadvantage vis-à-vis exporters in

competing countries. This could include higher drawback rates and inclusion of processed

fabrics, madeups and garments made of man-made fibres under the Focus Product Scheme.

(Currently, MMF garments and certain types of woven fabrics of MMF falling under HS Code

5512, 5513, 5514, 5515 and 5516 are covered under Market Linked Focus Product Scheme

for limited number of countries.). The proposed scheme is as follows:

a. A graduation scheme for three years can be introduced under the Focus product

scheme with benefits of 10% in first year, 7% in second year and 3% in third year.

b. This scheme may cover man-made textiles and garments. In case financial

implications do not permit coverage of textiles and garments then at least garments

sector should be incentivised as exports of these are currently very low in value

terms.

6. Textile industry should be kept out of GST for at least two years

7. Synthetic fibres should be covered under TUFS with fund support from their administrative

Ministry i.e. Department of Chemicals and Petrochemicals.

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a. The machinery for manufacture of synthetic fibres post polymerisation may be

covered under TUFS. Since the processes upto polymerisation are primarily chemical

in nature polymerisation machineries may not be covered.

b. The post polymerisation machinery may be benchmarked by TAMC in consultation

with proposed advisory council on MMF.

c. To encourage setting up of small size units, particularly from chips the restriction on

term loan and also on capital cost may be fixed by IMSC in consultation with TAMC

and proposed advisory council.

8. Introduction of anti-dumping proceedings on man-made fibres should involve consultation

with the Ministry of Textiles

9. Introduction of an institutional mechanism wherein government support (financial and

otherwise) is made available to industry associations/ players to initiate and defend anti-

dumping proceedings, where necessary

10. A MMF advisory council with all the stakeholders may be set up to monitor that the excise

duty and other concessions have been passed on by the MMF manufacturers and also to

take on integrated approach to solving the problems of MMF producers and users of MMF

and to accelerate their growth

11. MMF manufacturing and processing units should be given a priority under the gas allocation

policy, at par with the power sector.

XXI. If the above recommendations are implemented, it would result in high growth of man-made fibres

and textiles industry, thereby contributing to higher revenues, increase in employment generation, and

higher foreign exchange earnings. Financial implications of these recommendations would be

balanced by the intangible benefits and cascading effect in the economy.

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2.1. INDIAN SCENARIO

IMPORTANT MMF PLAYER IN THE WORLD

2.1.1. India is the second largest producer of man-made fibres in the world (World Fibre Report 2008), with

production of 2.50 billion kg of man-made fibres in FY09. The man-made fibres produced in India

include polyester (staple fibre as well as filament yarn), viscose (staple fibre as well as filament yarn),

acrylic (staple fibre), nylon (filament yarn) and polypropylene (staple fibre as well as filament yarn).

India is the second largest producer of PSF, PFY, VFY, third largest manufacturer of VSF and eighth

largest manufacturer of ASF.

Exhibit 2.1.1: Indian MMF industry: Key statistics (FY09P)

Fibre type Production

(mn kg) Exports (mn kg)

Consumption (mn kg)

Imports (mn kg)

Exports share in production

(%)

Imports share in consumption

(%)

PSF 751.6 136.4 650.7 16.50 18.1 2.5

VSF 232.8 28.4 222.8 10.98 12.2 4.9

ASF 79.5 1.6 90.5 10.60 2.0 11.7

PPSF 3.4 0.85 2.6 0.16 25.0 3.8

PFY 1330.3 81.5 1336.1 69.96 6.1 5.2

VFY 42.4 4.2 43.6 5.21 9.9 11.9

NFY 28.1 2.39 30.3 3.45 8.5 11.4

PPFY* 34.0 0.69 35.0 1.70 2.0 4.9

Total MMF 2502.1 255.66 2411.6 118.57 10.2 4.9

Note: Consumption = Production + Imports – Exports + Change in stock

Source: Office of Textiles Commissioner, Industry*, D&B India

CHANGING FIBRE COMPOSITION

2.1.2. The Indian textiles industry is predominantly cotton oriented with cotton accounting for 59 percent

share of total fibre consumption. However, globally the fibre consumption ratio is reverse, with MMF

constituting 60% of fibre consumption. Globally, consumption of fibres has tilted in favour of MMFs

over cotton due to various factors like changing fashion trends coupled with limitations to production

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of cotton. Even in India, the demand for man-made fibres has grown substantially over the last

decade, as it has emerged as a major substitute for cotton. The demand for synthetic textiles has

been growing due to its lower cost coupled with convenience and maintenance benefits associated

with the usage of synthetic garments. The share of man-made fibres in total fibre consumption (cotton

and MMF) has risen from 25% in early nineties to 41% at present.

Exhibit 2.1.2: Changing composition of fibre consumption in India (%)

Period Cotton

Man-made fibres

Synthetics Cellulosic Total MMF

FY91 74.3 17.0 8.7 25.7

FY96 71.3 21.2 7.5 28.7

FY00 59.6 34.6 5.8 40.4

FY01 59.0 34.8 6.2 41.0

FY02 57.7 36.9 5.4 42.3

FY03 54.7 39.2 6.1 45.3

FY04 55.1 39.1 5.9 44.9

FY05 56.6 37.8 5.6 43.4

FY06 59.1 35.6 5.3 40.9

FY07 59.2 35.8 5.0 40.8

FY08 58.5 36.6 5.0 41.5

FY09 59.0 36.4 4.6 41.0

Source: D&B India

2.1.3. However, during the last four years (since the quota abolition), the share of MMF in India’s fibre

consumption has almost stagnated (at around 40-41%) on account of rising cotton production and

increased demand for cotton by textile manufacturers to cater to exports demand from international

markets. Demand for cotton has risen from textile manufacturers of not only India but also other

competing countries like China in order to take maximum advantage of quota abolition in key import

markets, viz. the US and the EU. Due to rising global consumption of cotton, international cotton

prices have lowered, which have in turn led to decline in domestic cotton prices as well. This has

further contributed in increasing the demand for cotton in the domestic market, higher than the

demand for man-made fibres.

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POLYESTER ACCOUNTS FOR LARGEST SHARE IN MMF

2.1.4. Polyester is the most dominant man-made fibre in India, constituting over 83% of total man-made fibre

production and consumption in India; polyester filament yarn (PFY) constitutes over 53% of total MMF

production and polyester staple fibre (PSF) constitutes another 30%. The other major man-made fibre

produced and consumed in India is viscose (VSF constitutes 9.4% of total MMF production and VFY

constitutes another 1.7%). Remaining share is occupied by other fibres like acrylic, nylon and

polypropylene. Although India is producing most of the MMF as detailed above, specialized MMF

like acetate / tri-acetate fibre / yarn, cuprammonium filament yarn, nylon 66, nylon 11, Spandex, PVA

fibre and filament yarn, PBT yarn, modacrylic staple fibre, PTET (Poly-tri-methylene Teryphthalate)

are not being manufactured.

2.1.5. During the last ten years, demand for man-made fibres has grown at a CAGR of around 3% from 1.6

million kg (FY99) to 2.4 million kg (FY09). Amongst all fibres, polyester filament yarn has recorded the

highest growth of over 6% per annum. Steadily declining prices of PFY have been one of the major

factors pushing its demand in the domestic market. Huge capacity additions during the post quota

period have also helped in increasing the supply of PFY in the market, thereby pushing down the

prices and hence increasing the demand. Also,rising cotton prices coupled with increasing exports of

cotton and cotton based textiles helped polyester industry to capture some of the domestic market

share from cotton.

EXCESS CAPACITIES

2.1.6. India’s manufacturing capacity (functional installed capacities) for man-made fibres at present stands

at 3.4 billion kg (FY09), of which polyester accounts for 82.9%, followed by viscose with 11.6% and

remaining is of other man-made fibres. India’s manufacturing capacities for all man-made fibres at

present is more than adequate to meet the domestic demand.

Exhibit 2.1.3: Capacity utilisation (%)

Fibre type FY07 FY08 FY09

PSF 71.4 82.7 67.9

VSF 93.8 102.8 69.2

ASF 76.2 77.4 75.7

PPSF* 70.5 68.6 68.6

PFY 71.6 82.5 75.5

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Exhibit 2.1.3: Capacity utilisation (%)

Fibre type FY07 FY08 FY09

VFY 85.0 80.4 66.4

NFY 161.3 138.1 140.3

PPFY* 61.9 58.1 53.97

Total MMF 74.0 83.9 72.3

Source: Office of Textiles Commissioner,* Industry and D&B India

LIMITED NUMBER OF PLAYERS

2.1.7. Production scenario for man-made fibres/ filament yarn in India is characterised by presence of very

few players. For instance, VSF is produced only by Grasim Industries. Reliance Industries produces

about 64% of PSF and 48% of PFY. Century Enka and JCT Ltd produce about 85% of Nylon Filament

Yarn. Century Rayon and Indian Rayon Corporation produce about 80% of VFY.

RAW MATERIALS AVAILABILITY

2.1.8. India has had adequate production of raw materials required for manufacturing of major man-made

fibres, though some quantity is met through imports. However, the import intensity is high for fibre

intermediates like acrylonitrile and rayon grade wood pulp, where there is a clear shortage in domestic

production.

2.1.9. During the last year, there has been a rise in imports of certain key raw materials like PTA and MEG

on account of some shortage. However, more capacity additions in the industry are underway.

According to industry estimates, over 1,000 kta of PTA capacity and 325 kta of MEG capacity are

likely to come up in near future.

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Exhibit 2.1.4: Production of raw-materials (million kg)

Year FY06 FY07 FY08 FY09

Caprolactam 116.8 121.0 86.5 84.5

DMT 197.4 27.5 3.6 -

MEG 881.4 872.5 1078.1 783.2

Acrylonitrile 33.2 37.0 45.1 30.5

Rayon grade wood pulp 185.8 201.9 201.0 180.0

PTA 1,734.2 2,379.2 2,059.2 2,154.0

Source: ASFI, AMFII

2.1.10. The availability of rayon grade wood pulp for manufacturing viscose is a challenge in comparison to

paper-grade pulp as margins in case of latter are better. Moreover, wood pulp industry is subjected to

various environmental regulations across the world and these can be expected to increase in future in

the wake of changing climatic conditions. Further, for exports purpose industry players usually import

wood pulp as the quality of imported raw material is superior. Thus, future availability of rayon grade

wood pulp is an area of concern and could affect the growth of viscose fibre industry.

2.1.11. India is in a far better position than China in terms of raw material availability. China is the largest

manufacturer of man-made fibres in the world, however it is highly dependent upon imports for its raw

materials requirements. While China accounts for around 62% of global polyester production, its

share in global production of MEG is mere 11.4% and in PTA, it is only 26.5%.

Exhibit 2.1.5: Production of polyester and raw materials in select countries (2007)

Country

Polyester PTA MEG

Qty (mn kg) % Qty (mn kg) % Qty (mn

kg) %

China 19,177 62 10,056 26.5 2,051 11.4

India 2,275 7 2,647 7.0 844 4.7

South Korea 1,245 4 5,558 14.7 854 4.7

Taiwan 1,813 6 4,524 12.0 1,805 10.0

Other Asia 2,708 9 4,560 12.0 531 3.0

Other countries 3,876 12 10,537 27.8 11,904 66.2

Total 31,094 100 37,882 100 17,989 100

Source: ASFI

125

PRICE MOVEMENT OF MMF

2.1.12. Over the last decade, prices of key man-made fibres like PSF and PFY have seen a steady decline,

which has contributed to higher demand for same. One of the reasons for reduction in prices is the

capacity build-up leading to economies of scale for key MMF manufacturers and gradual reduction of

excise duty.

Exhibit 2.1.6: Price movement of fibres in India

Source: 2007-2008 Handbook of Statistics on MMF – ASFI

EXPORTS OF MAN-MADE FIBRES RISE SUBSTANTIALLY IN POST

QUOTA PERIOD BUT SLOW DOWN IN FY09

2.1.13. Rising capacities and production of man-made fibres since the dismantling of textile quotas have

helped in increasing the surplus for exports. Exports of all man-made fibres/ filament yarns (except

ASF, NFY and PPFY) witnessed a tremendous growth during the post quota period; exports of PSF

and PFY have recorded CAGR of 85% and 47.9% respectively during FY06-FY08, PPSF has

recorded CAGR of over 58% during the same period and exports of VSF and VFY have recorded

CAGR of 31% and 21.4% respectively during the same period. However, exports of most fibres

tumbled in FY09 due to the global economic slowdown.

2.1.14. On the contrary, India’s exports of value-added MMF products, especially apparel have steadily

declined. This can be attributed to lower price competitiveness of Indian exporters as against their

Asian counterparts in the international markets. Moreover, the competition has stiffened since the

dismantling of quotas, which has put pressure on exporters to lower their prices further. Since Indian

fabric and apparel exporters operate on thin margins, they have not been able to match the prices of

other Asian counterparts and hence have not been able to garner a larger share even in the post

quota regime.

126

Exhibit 2.1.7: India’s exports of MMF and MMF products (US$ million)

Item FY01 FY05 CAGR

(%) FY06 FY07 FY08 FY09 CAGR

(%)

MMF/ filament 265.3 377.9 9.2 405.7 641.4 841.0 686.6 19.2

MMF Spun Yarn 235.8 363.1 11.4 363.3 420.1 567.9 454.4 7.7

MMF Fabrics 496.1 1046.0 20.5 970.6 1013.7 1319.7 1630.0 18.9

MMF garments 744.8 489.0 -10.0 699.6 585.7 628.4 651.4 -2.4

Source: DGCI&S

2.1.15. As can be observed from the table below, the prices in last year have been much lower for Indian

exporters due to increased competition in the wake of global economic crisis. Further, since the

dismantling of quotas average export realisations in the US market have dropped from almost US$

2.9 per sqm in 2001 to just US$ 2.6 sqm in 2008. China has been able to garner almost 43% of USA’s

MMF garment imports on account of extremely low prices; the average price realisation for Chinese

exporters is only US$ 2.4 per sqm as against Indian exporters’ realisation of US$ 3.0 per sqm. India’s

export realisations are higher than the global average and also against other competing Asian

countries like Vietnam, Taiwan and South Korea.

Exhibit 2.1.8: Exports of MMF garments and realisations in USA for select countries

Country

2001 2005 2006 2008

Qty (mn sqm)

Price (US$/ sqm)

Qty (mn sqm)

Price (US$/ sqm)

Qty (mn sqm)

Price (US$/ sqm)

Qty (mn sqm)

Price (US$/ sqm)

World 6,564.3 2.9 8,199.4 2.5 8,165.1 2.6 8,252.9 2.6

India 129.5 3.2 149.6 3.3 119.4 3.5 98.3 3.0

China 453.4 4.8 2,596.6 2.2 2,824.7 2.4 3,536.3 2.4

Vietnam 7.5 1.5 409.0 2.7 433.8 2.8 641.6 2.9

Indonesia 317.6 3.4 404.0 3.1 466.6 3.2 451.1 3.2

Taiwan 470.1 2.6 289.3 2.5 259.0 2.5 170.6 2.7

South Korea 463.6 3.2 190.3 2.9 146.6 2.7 81.6 2.6

Source: OTEXA, D&B India

2.1.16. The industry dynamics for different man-made fibres and filament yarn have been discussed

hereunder.

127

POLYESTER STAPLE FIBRE

2.1.17. The production of polyester staple fibre (PSF) grew steadily from 522.7 million kg in FY99 to 644.2

million kg in FY05 registering a CAGR of 3.5%. The growth has been higher during the post quota

period (6.2% CAGR during FY06-FY09). Production of PSF has increased steadily and has always

been much higher that the domestic consumption, which has led to substantial growth in the exports

of this fibre.

Exhibit 2.1.9: Demand-supply indicators (mn kg)

Parameter FY99 FY05 FY09P CAGR

(FY99-FY05) CAGR

(FY06-FY09)

Production 522.7 644.2 751.6 3.5 6.2

Import 17.4 15.4 16.5 -2.0 1.5

Export 16.6 50.1 136.4 20.2 47.4

Consumption 494.0 623.0 650.7 3.9 2.1


2.1.18. The overall installed capacity levels of PSF currently stands at around 1104.3 million kg (FY09P). The

key players manufacturing PSF include Reliance Industries, Indo Rama and JCT Fibre. Reliance

Industries is the leading player with almost 64% of total production in the industry (FY09).

VISCOSE STAPLE FIBRE

2.1.19. The overall production of Viscose staple fibre (VSF) in India has grown at a CAGR of 2.7% from 178.2

million kg in FY99 to 232.8 million kg in FY09. While domestic production of VSF grew at a CAGR of

5.7% during the period FY99-05, the consumption grew at a CAGR of 22.8% during the same period.

However, production of VSF has fluctuated in the post quota period. There has been a rise in imports

during FY06-FY09 to cater to the domestic demand (CAGR of over 122%). The domestic

consumption of VSF grew from 228.1 million kg in FY06 to 250.4 million kg in FY08 registering a

CAGR of 4.8% during the same period. The installed capacity for VSF in the industry stood at 336.2

million kg in FY09. Grasim is the only manufacturer of VSF in India at present.

128



(FY99-FY05) CAGR

(FY06-FY09)

Production 178.2 248.0 232.8 5.7 0.5

Import 2.3 1.0 10.98 -12.96 122.3

Export 0.9 7.5 28.4 42.39 22.6

Consumption 182.0 225.0 222.8 22.76 -0.8


ACRYLIC STAPLE FIBRE

2.1.20. A reverse trend can be observed in the overall production of acrylic staple fibre (ASF) wherein the

period before the abolishment of quotas saw production levels increase from 78.9 million kg in FY99

to 127.6 million kg in FY05 (registering a CAGR of 8.3%) while the production levels dropped by 9.7%

in the post quota period (FY06-09).



(FY99-FY05) CAGR

(FY06-FY09)

Production 78.9 127.6 79.5 8.3 -9.7

Import 31.3 14.2 10.6 -12.3 -3.5

Export 0.4 14.0 1.6 80.9 -32.5

Consumption 105.0 126.0 90.5 3.1 -6.8


2.1.21. Dip in production levels in the period FY06-09 led to a 32.5% decrease in exports of the fibre. The

installed capacity of the acrylic staple fibre in India stood at 105 million kg in FY09. There are only

three key players manufacturing ASF at present, viz. Indian Acrylic Ltd, Pashupati Acrylon Ltd and

Vardhman Acrylic Ltd.

129

POLYPROPYLENE STAPLE FIBRE

2.1.22. The overall production of polypropylene staple fibre has grown steadily from 1.9 million kg in FY99 to

3.4 million kg in FY09 registering a CAGR of 6.2%. The production of the fibre grew at a CAGR of

7.3% in the pre quota abolishment period (FY99-05). The consumption of this fibre increased steadily

during the period FY99-05 registering a CAGR of 7.6%. In the period post abolishment of quotas, the

production levels grew at a CAGR of 3.1% from 3.1 million kg in FY06 to 3.4 million kg in FY09. While

the imports of polypropylene staple fibre contracted by 7.2% during the period FY06-09, its exports

increased by 28.6% during the same period.



(FY99-FY05) CAGR

(FY06-FY09)

Production 1.9 2.9 3.4 7.3 3.1

Import 0.1 0.6 0.16 34.8 -7.2

Export 0.2 0.4 0.85 12.25 28.6

Consumption 2.0 3.1 2.6 7.6 -3.6


2.1.23. The capacities in the PPSF industry have remained constant at 5 million kg for last few years. Zenith

fibres is the leading player manufacturing PPSF in India.

POLYESTER FILAMENT YARN

2.1.24. Consumption of polyester filament yarn has risen since FY01. From a level of 727 million kg in FY99,

consumption touched 1,336 million kg in FY09. Exports have also witnessed high growth during the

period FY04-FY08 - CAGR of 33.1%. However, exports slumped by almost 60% to 90.1 million kg in

FY09, due to the overall global economic slowdown, while domestic demand grew by a modest 4.3%

in FY09. With rise in domestic production, imports of PFY have come down steadily over the years.

From a high of 114.7 million kg in FY05, imports of PFY dropped to 69.9 million kg in FY09.

130



(FY99-FY05) CAGR

(FY06-FY09)

Production 745.4 1003.6 1330.3 5.1 7.3

Import 28.7 114.7 69.9 26.0 -8.9

Export 36.7 95.7 81.5 17.3 -8.3

Consumption 727.0 1041.1 1336.1 6.2 7.6


2.1.25. The installed capacity of PFY in industry stood at 1763.5 million kg in FY09. There are 43

manufacturing units in the country with functional installed capacity of 1,763 million kg per annum.

Reliance Industries is the largest player, accounting for almost 48% of total production of PFY in

FY09; the other major players are Indo Rama Synthetics, Garden Silk Mills, and JBF Industries.

VISCOSE FILAMENT YARN

2.1.26. Consumption of viscose filament yarn has come down since FY05. It has declined from 50.6 million kg

in FY05 to 41.8 million kg in FY08. It recovered marginally to 43.6 million kg in FY09. Due to decline in

demand, the overall production of viscose filament yarn (VFY) has also been declining in India.

Exports of VFY rose in the years following the abolishment of quotas, from 3.9 million kg in FY04 to

14.6 million kg in FY08. Exports however declined sharply to 4.2 million kg in FY09 due to the overall

global economic slowdown.



(FY99-FY05) CAGR

(FY06-FY09)

Production 60.9 53.6 42.4 -2.1 -7.2

Import 1.0 2.9 5.2 19.4 27.7

Export 5.2 7.7 4.2 6.7 -24.9

Consumption 51.0 50.6 43.6 -0.1 -2.9


2.1.27. There are around 7 manufacturers of VFY with an installed capacity of 63.9 million kg. Some of the

key players include Century Rayon and Indian Rayon. Together these two account for almost 80% of

total VFY produced in the country. Other players manufacturing VFY include Kesoram Rayon and

National Rayon Corporation.

131

NYLON FILAMENT YARN

2.1.28. Nylon filament yarn production increased steadily from 26.1 million kg in FY00 to 35.4 million kg in

FY05. The production has declined to 28.1 million kg in FY09. The post quota period (FY06-FY09)

has seen a considerable decline in overall demand and production for NFY. Even exports and imports

have seen a negative growth, as can be observed from table below.



(FY99-FY05) CAGR

(FY06-FY09)

Production 28.6 35.4 28.1 3.6 -8.6

Import 1.3 14.9 3.45 50.2 -32.5

Export 1.6 7.0 2.4 27.9 -21.8

Consumption 28.0 43.2 30.3 7.5 -10.7


2.1.29. The major units manufacturing NFY are Century Enka, JCT and Gujarat State Fertilizers Company.

The overall level of installed capacity of NFY in the industry currently stands at around 20 million kg.

POLYPROPYLENE FILAMENT YARN

2.1.30. The production of polypropylene filament yarn has risen from 36.6 million kg in FY01 to 39 million kg

in FY07. However, the production of this fibre has seen a dip in the last two fiscals and currently

stands at 34 million kg. One of the reasons for this dip has been a decline in demand during this

period on account of overall economic slowdown. The domestic consumption of PPFY was high at 44

million kg in FY04 but has gradually come down to 35 million kg by FY09.


Parameter FY01 FY05 FY09P CAGR (FY01-FY05) % CAGR (FY06-FY09) %

Production 36.6 38.1 34.0 1.0 -0.2

Import 0.6 5.9 1.7 77.8 -33.0

Export 2.2 1.0 0.7 -18.0 -9.8

Consumption 35.0 43.0 35.0 5.3 -3.5

Source: Office of Textiles Commissioner, Industry

132

2.1.31. In the periods when production has been lower than the overall domestic demand, there has been a

rise in imports of this fibre. During the last ten years, imports were highest in FY05 at 5.9 million kg,

when production was only 38.1 million kg as against the demand of 43.0 million kg. Exports of PPFY

have been very low, throughout the last ten year period and have seen a steady decline.

2.1.32. The capacity levels for PPFY currently stand at around 63 million kg. There are currently three main

players manufacturing PPFY, viz. Sumeet Synthetics, Filatax India and Shree Shyam Filament.

DYNAMICS OF VALUE ADDED MMF TEXTILES

2.1.33. MMF fabrics are produced primarily in the decentralized power loom sectors. The composite/big Mills

are not producing MMF fabrics. In fact, 75% of the polyester filament yarn fabrics are produced in the

Surat. Similarly, 65% of the MMF spun yarn fabrics are produced in Bhilwara. Bhiwandi and

Ichalkaranji are also major centres for MMF spun and mixed fabrics.

2.1.34. India’s overall cloth production increased at a CAGR of 4.9% from 45.4 billion square meters in FY05

to 55 billion square meters in FY09. Among the different varieties of fabrics, production of MMF

fabrics have grown steadily at a CAGR of 5.4% from 21 billion square meters in FY05 to 24.6 billion

square meters in FY08 and then declined by 2.8% y-o-y to 23.9 billion square meters, on account of

global slowdown leading to tepid demand from international markets.

2.1.35. In terms of composition, the share of MMF based fabrics (100% Non cotton and 50% of blended

fabrics) in total fabric production has contracted from 47% in FY05 to 44.1% in FY09, while the share

of cotton based fabrics has increased from 46.2% to 49.6% in the same period.

Exhibit 2.1.17: Production of MMF fabrics in India

133

2.1.36. Major items of MMF produced in the country are sarees, dress materials, shirting, suitings, home

textiles etc. In fact, 90% of the total sarees are now made of MMF. Cotton sarees are pre-dominantly

made in Handloom sector.

2.1.37. MMF textiles are cheaper vis a vis cotton and easy to maintain. Therefore, MMF fabrics and garments

are consumed mostly in rural, semi-urban and lower income segments in urban areas. There are

some local brands famous in the semi-urban, rural areas like Kumar, Cambridge etc. which enjoy

huge market share. In India, tailored garments have a huge market share and these are pre-

dominantly MMF fabrics based. The major MMF garment producing centres in the country are

Kolkata, Delhi and Indore.

2.1.38. There is a perception that in the domestic market cotton garments are predominant, but this not the

case. MMF products are predominantly consumed in the domestic market. MMF garments are

predominant to the extent of 65% in the domestic market, while in the export market cotton garments

are predominant to with over 80% share. The issues and concerns emanating out of imbalanced fibre

based T&G portfolio in India’s exports basket are discussed in detail in Chapter 3.

FUTURE DEMAND FOR MMF

2.1.39. Currently, India has excess capacities for many man-made fibres/ filament yarns and these are

adequate to meet the current and near future demand for man-made fibres. However, given the

changing consumer pattern in favour of man-made fibre based textiles, there is a need to assess the

medium term and long-term demand for man-made fibres in India. The demand for man-made fibres

depends upon the demand for yarns and fabrics, which in turn depends upon the consumption of

finished textiles viz. apparel and made-ups. Thus, in order to determine the future requirements for

man-made fibres/ filament yarns, we first need to assess demand for fabrics and finished textiles

made from man-made fibres, both for the domestic market as well as exports.

2.1.40. A top-down approach has been followed to determine the demand for man-made fibres in FY15 and

FY20. We have considered three scenarios, namely GDP growing at 7%, 8% and 9% respectively for

the next ten years. The share of private final consumption expenditure is taken as 67%, in line with

the average share over the past five years. The Eleventh five year plan report of the planning

commission for Textiles and Garments considers the share of textiles and clothing in PFCE to be

around 5.5% for FY08. It has been observed that over the past few years, the relative share of textiles

and clothing in total PFCE has come down due to increased private expenditure on transport and

communication, education, recreation, etc. Thus, we have considered the share of textiles and

clothing in the PFCE to be 5.3% for FY15 and 5.1% for FY20.

134

Exhibit 2.1.18: Demand projections for various man-made fibres/ filaments

Fibre

Current FY15E

Demand range (mn kg)

FY20E

Demand range (mn kg)

Domestic Demand*

(mn kg)

Existing capacities**

(mn kg)

PSF 739.1 1,104 1,066.7 – 1,147.1 1,542.9 – 1,743.6

VSF 250.4 336 359.3 – 386.4 514.3 – 581.2

ASF 94.7 105 128.6 – 138.3 169.5 – 191.6

PPSF 2.8 5 3.8 – 4.1 5.7 – 6.4

PFY@ 1,280.7 1,763 2,053.9 – 2,208.7 3,170.6 – 3,583.1

VFY 41.8 64 64.3 – 69.1 90.4 – 102.2

NFY# 28.7 20 45.4 – 48.8 67.8 – 76.6

PPFY 38.0 63 60.5 – 65.1 90.4 – 102.2

Domestic demand 2,476.1 3,460 3,782.5 – 4,067.6 5,651.6 – 6,386.9

Exports 453.9 – 488.1 678.2 – 766.4

Imports 151.3 – 162.7 226.1 – 255.5

Net demand/ requirement 4,085.1 – 4,393.1 6,103.8 – 6,897.9

E-Estimated, * -FY08 figures (FY09 has not been considered as it was an exceptional year with negative overall growth), ** - FY09 figures, @ Capacity under Board Banding scheme indicated against PFY,

# Exclusive capacity of NFY

Source: D&B India

2.1.41. Based on the above estimates, the demand for man-made fibres/ filament yarns in FY15 is projected

between 4,085 million kg and 4,393 million kg. Demand for man-made fibres/ filament yarns in FY20

is projected between 6,103.8 million kg and 6,897.9 million kg.

135

Exhibit 2.1.19: Future MMF requirements under different GDP growth scenarios (million kg)

FY15E FY20E

7% 8% 9% 7% 8% 9%

Domestic demand 3782.5 3921.1 4067.6 5651.6 6000.6 6386.9

(+) Exports 453.9 470.5 488.1 678.2 720.1 766.4

(-) Imports 151.3 156.8 162.7 226.1 240.0 255.5

Total fibre requirement 4085.1 4234.8 4393.1 6103.8 6480.6 6897.9

E- Estimated

Source: D&B India

2.1.42. The future fibre demand for different man-made fibres has been compared with existing capacities.

The current level of existing capacities of all man-made fibres would be insufficient to meet the future

demand and hence the above MMFs would require capacity additions by manufacturers. Detailed

explanation of demand projections is provided in annexure (Annexure 2.A.2).

136

2.2. GLOBAL SCENARIO

2.2.1. Global production of fibres has increased steadily at a CAGR of 4% from 35,438 million kg in 1990 to

68,669 million kg in 2007. The production of MMFs has grown at a faster rate as compared to natural

fibres. While production of MMFs has grown steadily at a CAGR of 6% (from 14,409 million kg in 1990

to 41,052 million kg in 2007), production of natural fibres has increased at a CAGR of 2% during the

same period.

Exhibit 2.2.1: Trend in production of fibres

Source: World Fibre Report 2008

2.2.2. The share of natural fibres in total production of fibres has rapidly deteriorated from 59% in 1990 to

40% in 2007, while that of man-made fibres has expanded rapidly from 41% in 1990 to the current

60%. This can be attributed to the higher growth of MMF production vis-à-vis cotton; while MMF

production recorded a CAGR of 6.6% during the ATC period (1994-2004).

Exhibit 2.2.2: Change in composition of fibres

MMF41%

Natural f ibres59%

1990

MMF60%

Natural f ibres40%

2007


137

Exhibit 2.2.3: Trend in global production of MMF


COMPOSITION OF MAN-MADE FIBRES

2.2.3. Globally, polyester is the most dominant man-made fibre, with a share of around 77% in total

production and consumption of man-made fibres. It is followed by nylon, with a share of 9.4% and

thereafter viscose, which constitutes roughly 7.7% share.

Exhibit 2.2.4: Composition of MMF’s production and consumption (2007)

ASF, 5.9

Nylon, 9.4

PFY, 46.5

PSF, 30.9

VFY, 1.1VSF, 6.0 Acetate, 0.2

Production

ASF, 6.0Nylon, 9.4

PFY, 45.9

PSF, 31.0

VFY, 1.2 VSF, 6.6

Consumption


2.2.4. Polyester: Polyester accounted for a major share of 77% in the production and consumption of MMFs

in 2007. This impressive performance of polyester can be attributed to a rapid increase in capacity of

this fibre. Overall capacity of polyester has increased at a CAGR of 8% from 10,837 million kg in 1990

to 40,724 million kg in 2007. The period after the abolition of quotas witnessed a 70.6% increase in

capacities of polyester to 36,376 million kg from 21,321 million kg in 2004. Among the varieties of

polyester fibre, production of PFY increased by 14.4% y-o-y while that of PSF grew by 12.3% in 2007.

138

2.2.5. Nylon: Nylon is the second largest fibre after polyester in production and consumption of global

MMFs in 2007. Nylon held a 9.4% share in both production as well as consumption of MMFs in the

same period. However, its production has grown at a CAGR of just 2% from 2,783 million kg in 1990

to 3,848 million kg in 2007. In the period after abolition of quotas (2005-07) the production declined by

1% and consumption declined by 1.2%. Global capacities of Nylon reduced by 1.2% in the same

period. The sluggish growth of nylon in terms of production as well as consumption could be attributed

to increased competition from other low priced MMFs especially polyester.

2.2.6. Acrylic Staple Fibre: ASF held a 6% share in production and consumption of MMFs in 2007.Overall

capacity of ASF has increased marginally by 0.3% from 2,860 million kg in 1990 to 3,000 million kg in

2007. Capacity additions in ASF have been the lowest amongst all the MMFs. In 2007, around 306

million kg of capacity was reduced as compared to 2006. One of the prime reasons for the overall

slow growth in capacity additions is increasing competition from natural fibres like wool in both quality

as well as prices. Also, unlike polyester or nylon the usage of ASF is limited. Thin margin is also

another major factor which has hampered the growth of this fibre.

2.2.7. In 2007, the production and consumption of ASF declined by 2.4% and 5.5% respectively. This

decline could be attributed to increase in raw material prices coupled with thin profit margins. High

input prices (especially acrylonitrile) also compelled many Chinese manufacturers to reduce

production and/or shut down manufacturing units.

2.2.8. Viscose: Industry experts felt the global demand for VSF would reduce during the period 1990-2002

and the fibre would hold a minor share in overall MMFs production finding usage in small specific

applications. However, the trend reversed post 2003 when the demand starting rising. Also, during the

same period, production base for this fibre shifted from high cost developed markets to low cost

emerging markets like China. In 2007, VSF held a 6% and 6.6% share in production and consumption

of MMFs. Despite holding a minor share in production and consumption of MMFs, VSF production

grew at a CAGR of 7.4% (second largest after polyester filament yarn) in the period after the abolition

of quotas.

REGIONAL COMPOSITION

2.2.9. China is the single largest manufacturer and consumer of MMFs and accounted for a 56% share in

global production of MMFs in 2007. Detailed analysis of Chinese MMF industry has been covered in

the sub-sequent section.

139

Exhibit 2.2.5: Major producer countries of MMF (2007)

Fibre Country

PFY China, India, Taiwan, South Korea, Indonesia

PSF China, India, USA, Pakistan, South Korea

Nylon China, USA, Taiwan, South Korea, Germany

VSF China, Indonesia, India, Taiwan, Thailand

ASF China, Turkey, Japan, Germany, Taiwan

VFY China, India, Japan, USA, Czech Republic

Acetate USA, Japan, Spain


2.2.10. USA was one the major producers of MMFs till the 1980s. In the period of 1990s, it lost its major

share to other low cost Asian nations like China, India and Japan. In early 1990s, USA accounted for

a 26% share in global production of textile fibres and this share further contracted to 15% by 2000 and

in 2007 USA’s share further deteriorated to 6%. USA is the second largest producer of nylon and third

largest producer of polyester staple fibre. It ranks fourth and seventh in the global production of

viscose filament yarn and polyester filament yarn respectively. In terms of consumption, USA is one of

the top ten consumers of all types of textiles fibres/filaments.

Exhibit 2.2.6: Region wise break-up of world’s MMF production (2007)

Source: 2007-2008 Handbook of Statistics on MMF – ASFI

2.2.11. Taiwan was the third largest producer of MMFs in 2007 accounting for a 6% share in global

production of MMFs. West Europe, comprising of major textile nations like Greece, Germany Spain,

Italy and France, accounted for a 4% share in global production of MMFs in 2007. This region is one

of major manufacturers of acrylic and viscose fibre/filament. West Europe accounted for 13% of global

production of nylon and 2% polyester production in the same period.

140

2.2.12. South Korea is the fourth largest producer of nylon and polyester filament yarn, fifth largest

manufacturer of polyester staple fibre and sixth largest producer of viscose filament yarn. The region

accounted for a 4% share in global production of MMFs in 2007.

2.2.13. Japan, as per industry experts, is phasing out its production of MMFs. In early 1990, Japan accounted

for 12% share in global production of MMFs and this share contracted to 5% by 2000. Japan relies on

imports for its demand for MMFs. Despite Japan’s share fast contracting in supply of MMFs, the

regions remains one of the top ten suppliers and consumer of many MMFs. The region is third largest

producer of acrylic staple fibre and viscose filament yarn, sixth largest producer of viscose staple

fibre, eight largest in nylon, ninth largest producer of polyester staple fibre and tenth largest

manufacturer of polyester filament yarn.

2.2.14. The dynamics of man-made fibre industry for major countries and their policies are discussed in detail

in the annexure (Annexure 2.A.1).

141

2.3. ISSUES AND CONCERNS

EXCISE DUTY ANOMALIES

2.3.1. There exists a discrepancy in the duty charged on cotton vis-à-vis man-made fibres and textiles. For

instance, cotton is exempt from payment of excise duty whereas MMF manufacturers have to pay an

excise duty of 8%. MMF textiles also have a disadvantage vis-à-vis cotton textiles as the former

attract a mandatory CENVAT of 8% while the latter attracts only 4%, which is optional. Since cotton

does not attract any excise duty, most of the cotton yarn and fabric manufacturers prefer not to pay

any excise duty. Consequently, there is a disadvantage for MMF and MMF textiles’ manufacturers vis-

à-vis cotton and cotton textiles’ manufacturers.

Exhibit 2.3.1: Excise duty for 2009-10 (%)

Item Cotton Polyester Nylon Viscose Acrylic

Raw material Nil 8.24 8.24 Nil 8.24

Fibre/ filament - 8.24 8.24 8.24 8.24

Spun/ blended yarn 4.12* 8.24 8.24 8.24 8.24

Fabrics 4.12* 8.24 8.24 8.24 8.24

Garments 4.12* 8.24 8.24 8.24 8.24

Note: Excise duty includes 3% education cess on Basic Excise duty

* Optional Cenvat; if no Cenvat then nil duty


2.3.2. On the contrary, the excise duty structure in most of the other competing countries is uniform across

different fibres as well as the value chain. For instance, China levies a uniform VAT of 17% on all

fibres as well as textile products. Hence, there is a need to address this issue urgently and to make

the duty structure uniform for all fibres. 20

Exhibit 2.3.2: ExCross country duty rates comparison

India China * Indonesia Thailand

Cotton Nil 17% 10% 7%

Cotton yarn 4%/ Nil 17% 10% 7%

MMF 8% 17% 10% 7%

MMF yarn 8% 17% 10% 7%

Note: * - VAT rate Source: WTO, D&B India

142

CUSTOMS DUTY ANOMALIES

2.3.3. Historically, customs duty on man-made fibres had been very high. Over the last five years, customs

duties have been lowered substantially and currently prevail at about 5% for most man-made fibres.

However, the effective customs duty rate (after inclusion of SAD, CVD, etc) can be considered high

for certain fibres.

2.3.4. Certain raw materials for polyester such as Titanium di-oxide and spin finish oil attract a higher duty

than polyester fibres/ filaments. This is a clear case of inverted duty structure. According to industry

estimates, these additives constitute roughly 2-3% of total cost of production and are largely imported.

Thus, a high customs duty on these items increases the cost of production of man-made fibre

manufacturers.

Exhibit 2.3.3: Customs duty on MMF, raw materials and finished goods (2009-10)

Item Basic Custom duty (%)

Raw Materials

DMT, PTA, MEG 5.00

Acrylonitrile 5.00

Caprolactum 10.00

Propylene 5.00

Rayon grade wood pulp 5.00

Titanium Dioxide 10.00

Spin finish oil 7.50

Fibre/ Filament

PSF, ASF, VSF 5.00

PFY, VFY 5.00

NFY 10.00

Spun Yarn 5.00

Blended Yarn 10.00

Fabrics made of MMF 10.00 or Specific duty whichever is higher.

143

2.3.5. The customs duty in most competing countries do not have an inverted duty structure. For instance, in

South Korea, the customs duty on PTA and MEG is only 4.8% and 3% respectively and that on

polyester is higher at around 8%. In case of Thailand, there is no customs duty on basic raw materials

like PTA and MEG.

Exhibit 2.3.4: Duty structure on raw materials

Item India (FY10)

China (2008)

South Korea (2008)

Thailand (2007)

USA (2008)

PTA 5.0 6.5 4.8 Nil 6.5

MEG 5.0 5.5 3.0 Nil 5.5

Titanium di-oxide 11.0 5.5 Nil Nil 5.5

PSF 5.0 5.0 8.0 1.0 4.3

PFY 5.0 5.0 8.0 5.0 7.5

RGWP 5.0 Nil Nil Nil Nil

VSF 5.0 5.0 2.0 1.0 4.3

VFY 5.0 5.0 2.0 5.0 9.6

Source: WTO

DELAY IN GETTING DRAWBACK /EXCISE REBATE CLAIMS

2.3.6. At present, majority of MMF Textiles exporters are operating under Drawback/DEPB Scheme.

Appropriate Drawback Rates are crucial for growth in MMF Textiles Exports as it enables the players

to become competitive in the global markets. However, in FY09, there was a 4-5 percentage points

reduction in duty drawback rates for MMF without any changes in the duty rates.

Exhibit 2.3.5: Delay in reimbursement of drawback/excise rebate claims

Union Budget

Excise Duty On

MMF

Custom Duty On

MMF

Drawback Rates

Export Product Drawback Rates Effective

From

2007-08 8 % 5 % 14.8 %

17.5 %

MMF spun yarns (grey)

MMF spun yarns (dyed)

16-07-2007

2008-09 8 % 5 % 10.2 %

12.1 %

MMF spun yarns (grey)

MMF spun yarns (dyed)

01-09-2008

Source: SRTEPC

144

CONCERNS ABOUT ANTI DUMPING DUTIES

2.3.7. Anti-dumping duties are imposed to neutralise price differential between the normal value of the like

article in the domestic market of the exporting country and the export price of the product under

consideration. Currently, anti-dumping is levied on almost all man-made fibres, details of which are

as follows:

Import of POY from China, Taiwan, Indonesia, Malaysia and Thailand

Import of VFY from China

Import of NFY from China, Taiwan, Malaysia, Indonesia, Thailand and South Korea

Import of full drawn/fully oriented yarn/spin draw yarn/flat yarn of Polyester from

Indonesia, South Korea, Malaysia and Taiwan

Imports of Polypropylene

2.3.8. There is an argument by the spinning and weaving sectors that imposition of anti-dumping duties on

man-made fibres increases their input costs, rendering them uncompetitive in the global markets.

2.3.9. There is also apprehension amongst the user industry of man-made fibres about the mechanism

followed for levying anti-dumping duties; they believe that user community is not adequately consulted

while levying anti-dumping duties on man-made fibres/ filaments, which is their key raw material.

2.3.10. Secondly, the users of man-made fibre generally constitute small players who are not able to initiate

anti-dumping proceedings for their products, as it involves huge costs.

LOWER EXPORT BENEFITS FOR STANDALONE GARMENT

MANUFACTURERS

2.3.11. There are very few organised integrated players producing MMF fabrics and garments. Most of the

garment manufacturers have to procure MMF fabrics externally and are not able to get cenvat since

MMF fabrics producers are in the decentralised sector operating under optional cenvat route. Only

integrated organised players are able to get cenvat and DEPB which is more beneficial by 2-2.5% as

against stand alone RMG units which get only duty draw back or DEPB.

145

CONCERNS ABOUT GST

2.3.12. The Goods and Services Tax (GST) is to be introduced in the country from April 2010. It would be of

similar nature of VAT but would include other indirect taxes such as Cenvat, service tax. It would be

dual GST comprising of Central GST and State GST. GST would be destination based, while sales

tax and VAT for inter-state transactions are origin-based. On inter-state transactions of goods &

services, IGST (Integrated GST) would be applicable which would be equal to C-GST and S-

CST. The inter-state transactions would include sales of goods and services and inter-state depot

transfer of goods.

2.3.13. The textiles industry involves a lot of inter-state transfers especially at the fabric stage. Due to long

supply chain in the textile industry involving traders in various cities, towns, etc, the inter state

transactions are likely to take place among the organised players who are above the threshold limit for

GST exemption and small decentralised traders who are exempted from payment of GST.

Consequently, the regular payee (one above threshold limit) would not get any credit for purchases

from small decentralised trader but shall have to pay full duty on the sale price. Thus, the tax will

multiply and the purpose of VAT principle would be broken. This would have serious cost implications

on the exporters.

NIL INDIGENOUS PRODUCTION OF SPECIALISED MMF

2.3.14. MMF like acetate, cuprammonium filament yarn, nylon 66, nylon 11, spandex, PVA fiber and filament

yarn, which are required for manufacture of high end fashion garments, lingerie, swimming costumes,

Stockings, high end ladies garments are not produced indigenously and have to be imported by the

weavers. Thus, there is a need to have policy incentives in place to encourage domestic production of

such fibres in India.

LIMITED NUMBER OF MMF PLAYERS

2.3.15. There are only a few big players manufacturing man-made fibres in India. The industry follows a

pricing policy on import parity basis at landed cost. User industry has submitted that MMF producers

export man-made fibres at lower prices than in the domestic market. This submission is supported by

SRTEPC exports data analysed by FIASWI in respect of polyester fibre and yarn.

146

Exhibit 2.3.6: Share of manufacturers in MMF production

Fibre Manufacturer Installed capacity in

T.P.A (as of 31/3/2009) Production M.T.

(FY09P) % share

(Production)

VSF

Grasim Industries

Others

Total

359,975

58,700

418,675

232,746

-

232,746

100.0

-

100.0

PSF

Reliance Industries


JCT Fibre

Others

Total

550,000

263,550

128,612

240,568

1,182,730

478,959

136,440

55,616

79,094

750,109

63.9

18.2

7.4

10.5

100.0

ASF

Indian Acrylic

Pashupati Acrylon

Vardhman Acrylics

Others

Total

45,000

30,000

18,000

60,000

153,000

34,310

26,512

18,690

-

79,512

43.2

33.3

23.5

-

100.0

PPSF

Zenith Fibre

Others

Total

3,900

4,800

8,700

3,430

-

3,430

100

-

100

VFY

Century Rayon

Indian Rayon Corporation

Kesoram Rayon

Others

Total

25,000

16,400

6,500

32,200

80,100

17,332

16,624

7,605

858

42,419

40.9

39.2

17.9

2.0

100.0

PFY

Reliance Industries


JBF Industries

Others

Total

670,900

259,000

144,000

939,588

2,013,488

639,973

210,092

139,552

342,471

1,332,088

48.0

15.8

10.5

25.7

100.0

NFY

Century Enka

JCT

Gujarat State Fertilizers

Others

Total

125,200

14,000

6,000

164,244

309,444

12,519

11,373

4,171

6

28,069

44.6

40.5

14.9

0.0

100.0


147

LACK OF COMPETITIVENESS IN EXPORTS

2.3.16. India is the second largest producer of man-made fibres in the world (World Fibre Report 2008) with

presence of large plants having state-of-the art technology. MMF textiles constitute almost two-third of

the domestic textile market. However, India’s share in global exports of value-added textiles of man-

made fibres is miniscule at around 2.25% in 2008 (India’s MMF exports were US$ 3.3 billion as

against global exports of US$ 146.7 billion). Further, while textiles made of man-made fibres

constitute around 63% of the world trade, it is mere 16.4% (FY09) in case of India as Indian textiles

exports are predominantly cotton based.

2.3.17. India’s total MMF textiles exports have risen at a CAGR of 15.6% during FY05 to FY09; however, the

growth has slowed down during the last fiscal, primarily due to slowdown in the global demand.

Exhibit 2.3.7: India’s MMF textile exports

Source: SRTEPC

2.3.18. During FY09, there has been a decline in exports of several MMF textiles, including majority of MMF

yarns, spun fabrics, viscose filament fabrics and blended fabrics like polyester viscose and polyester

cotton, MMF based furnishing articles, and also dress materials.

148

EXPORTS DISADVANTAGE AGAINST COTTON TEXTILES

2.3.19. Post dismantling of textile quotas in 2005, India has been able to increase its cotton textiles and

garments exports at a higher rate as against MMF textiles and garments. In case of value-added

textiles, India’s performance in cotton apparel has been better than that of MMF apparel.

Exhibit 2.3.8: Major suppliers of cotton apparels

World imports (US$ mn) 2005 2008 CAGR (%)

Cotton apparel Total imports 147,951.9 185,092.9 7.8

China 39,736.7 62,776.4 16.5

India 9,132.3 12,373.6 10.7

Bangladesh 8,323.7 14,470.1 20.2

Pakistan 2,495.5 3,129.0 7.8

Sri Lanka 2,116.3 2,846.0 10.4

Source: UN Comtrade

2.3.20. During 2005-2008, India has registered a CAGR of 10.7% in case of cotton apparel exports to the

world, higher than the average global growth of 7.8%. On the other hand, India’s exports of MMF

apparel have witnessed a decline from US$ 1.12 billion in 2005 to 1.08 billion in 2008, while average

annual global growth in MMF imports has been 6.9% during the same period.

Exhibit 2.3.9: Major suppliers of MMF apparels

World imports (US$ mn) 2005 2008 CAGR (%)

MMF apparel Total imports 45,883.7 56,093.4 6.9

China 20,289.2 27,853.9 11.1

India 1,123.3 1,076.5 -1.4

Taiwan 312.5 214.3 -11.8

Pakistan 127.2 127.4 0.0

Vietnam 1,643.3 2,678.5 17.7

Indonesia 1,375.8 1,483.8 2.6

Source: UN Comtrade

149

2.3.21. Indian MMF textiles have witnessed dismal performance in both US and EU markets. In the EU

market for MMF apparel, Vietnamese exporters have given serious competition to Indian exporters; in

2005, Vietnam’s MMF apparel exports to the EU were 12% lower than India’s exports, however by

2008, Vietnam’s exports have reached US$ 538 million, which is almost 40% higher than India’s MMF

apparel exports in that year. Chinese exports too have increased at over 13% CAGR in this market

during 2005-2008, while India has recorded a CAGR of only 3.9%. Consequently, India’s share in

MMF apparel imports of EU has declined from 3.9% in 2005 to 3.2% in 2008.

2.3.22. Similarly, in the US market too, India’s performance has been dismal due to which its share in MMF

apparel imports of the country has declined from 2.2% in 2005 to mere 1.7% in 2008. On the contrary,

China has seen a considerable jump in its share in the USA’s MMF apparel imports, from 32% in

2005 to almost 43% in 2008.

Exhibit 2.3.10: Major suppliers of cotton apparel to EU markets

EU imports (US$ mn) 2005 2008 CAGR (%)

Cotton apparel Total imports 29,193.5 42,955.2 13.7

China 7,475.5 15,016.5 26.2

India 2,789.8 4,151.6 14.2

Bangladesh 2,963.6 5,198.5 20.6

Pakistan 646.4 863.4 10.1

Sri Lanka 490.8 833.4 19.3

Source: UN Comtrade

Exhibit 2.3.11: Major suppliers of MMF apparel to EU markets

EU imports (US$ mn) 2005 2008 CAGR (%)

MMF apparel Total imports 8,950.1 11,892.9 9.9

China 4,496.3 6,502.4 13.1

India 342.6 384.5 3.9

Taiwan 32.9 23.4 -10.8

Pakistan 40.7 42.5 1.4

Vietnam 302.1 538.2 21.2

Indonesia 273.9 269.7 -0.5

Source: UN Comtrade

150

Exhibit 2.3.12: Share in USA’s imports of cotton products

Share in USA’s imports (%) 2005 2006 2007 2008

Cotton Products

India 6.9 7.4 7.4 7.7

China 17.0 20.9 26.2 27.7

Pakistan 5.3 5.8 5.5 5.5

Bangladesh 3.6 4.3 4.6 5.3

Sri Lanka 2.2 2.2 2.1 2.0

Source: OTEXA

Exhibit 2.3.13: Share in USA’s imports of MMF products

Share in USA’s imports (%) 2005 2006 2007 2008

MMF Products

India 2.2 2.0 1.6 1.7

China 32.1 36.4 41.3 42.7

Pakistan 0.6 0.4 0.4 0.4

Bangladesh 2.1 2.2 2.0 2.2

Sri Lanka 1.8 1.6 1.3 1.3

Source: OTEXA

HIGHER EXPORT PRICES OF INDIAN EXPORTERS

2.3.23. The major reason for a decline in India’s competitiveness in MMF apparel is that Indian exporters

have not been able to match the export prices offered by key competing countries. An analysis of

USA’s MMF apparel imports reveals that India’s export realisations in 2008 are 20-30% higher than

key competing countries like China, South Korea, Vietnam, and Taiwan. Further, while Chinese and

South Korean exporters have been able to bring down their export prices by over 50% and 25%

respectively between 2001 and 2008, Indian exporters have been able to lower the prices by only 6%

during the same period. This reflects the lack of competitiveness of Indian MMF apparel exporters vis-

à-vis their counterparts in competing countries.

151

Exhibit 2.3.14: Comparative snapshot of USA’s imports of MMF apparel

USA’s imports of MMF apparel

2001 2005 2006 2008

Qty (mn

sqm)

Price (US$/ sqm)

Qty (mn

sqm)

Price (US$/ sqm)

Qty (mn

sqm)

Price (US$/ sqm)

Qty (mn

sqm)

Price (US$/ sqm)

Total imports 6,564.3 2.9 8,199.4 2.5 8,165.1 2.6 8,252.9 2.6

India 129.5 3.2 149.6 3.3 119.4 3.5 98.3 3.0

China 453.4 4.8 2,596.6 2.2 2,824.7 2.4 3,536.3 2.4

South Korea 463.6 3.2 190.3 2.9 146.6 2.7 81.6 2.6

Vietnam 7.5 1.5 409.0 2.7 433.8 2.8 641.6 2.9

Indonesia 317.6 3.4 404.0 3.1 466.6 3.2 451.1 3.2

Taiwan 470.1 2.6 289.3 2.5 259.0 2.5 170.6 2.7

Source: OTEXA

2.3.24. Major reasons cited for India’s higher prices is higher cost of production for the manufacturers/

exporters. Further, discriminatory excise duty on man-made fibres vis-à-vis cotton can be attributed to

non-competitiveness of Indian MMF textiles exporters vis-à-vis cotton textile exporters.

LACK OF INCENTIVES FOR EXPANSION

2.3.25. The installed capacities of man-made fibres are currently adequate in India. However, operating rates

have been around 73% on account of depressed demand in recent times. Since more capacities are

expected to come up in future, operating rates may fall further. The man-made fibre industry is a

capital intensive industry with long gestation period. Hence, addition of capacities without adequate

demand would lead to drop in operating margins of the industry, which is already under pressure

since last year. Under such scenario, it will be difficult for manufacturers to lower the prices and to

make any further capacity expansions.

2.3.26. However, additional capacities are required in the industry in wake of future demand (medium to long-

term) for man-made fibres. Thus, it is desired that incentives are provided to the industry to accelerate

the process of capacity build-up, to ensure adequate supply of fibres to the user industry.

2.3.27. At present, TUFS is not applicable to manufacture of synthetic fibres as the sector falls under the

ambit of Department of Chemicals and Petrochemicals. If TUFS is available to manufacturers of

synthetic fibres as well, it would aid in reducing the capital cost and hence the capital servicing

152

charges such as depreciation and interest on debt taken for capital equipment purchase. Thus,

industry players want certain allocation of funds under TUFS for synthetic fibre manufacturing.

2.3.28. However, due to high capital intensity of such projects, huge funds are required and since the overall

allocation under TUFS is often not sufficient to meet the requirements of textile industry itself, the

synthetic fibre/yarn industry may be coverd under TUFS with fund support from their administrative

Ministry, i.e., Dept. of Chemicals and Petrochemicals to reduce the burden of debt servicing charges.

RAW MATERIAL AVAILABILITY

2.3.29. India has adequate capacities of raw materials required for manufacturing of polyester, namely PTA

and MEG. Although industry had faced some shortage in the past few months, several new projects

are underway, which are expected to increase the production of PTA to 3.5 million tpa and of MEG to

1.25 million tpa.

2.3.30. However, there is a shortage of good quality rayon grade wood pulp in India. Manufacture of one unit

of VSF/VFY requires 1.05 units of wood pulp. India’s total requirement of wood pulp stands at 407.4

mn kg (VSF and VFY capacity stands at 334 and 54 mn kg respectively) if full capacity utilisation

levels are achieved. In FY09, demand for RGWP stood at 286 mn kg while the actual supply was just

180 mn kg. The industry faced a shortage of wood pulp to the tune of 106 mn kg (37% of demand).

This adverse scenario has led to a surge in imports of wood pulp into the country.

Exhibit 2.3.15: Demand-supply scenario in availability of RGWP

295324

306323

355

286

185 182 186202 201

180

0

50

100

150

200

250

300

350

400

FY04 FY05 FY06 FY07 FY08 FY09

mn kgs

Demand Supply

Source: AMFII

2.3.31. Further, the quality of wood pulp available in the Indian markets is not of superior quality. The pulp is

often made up of mixed and immature hard wood which is poor in quality and homogeneity. Usage of

this pulp leads to manufacture of fibre that is inferior, yarn that is of poor quality and a subsequent

153

product (fabric/garment) that is of low quality. Quality of imported pulp is much better as compared to

Indian pulp. India sources majority of its pulp requirements from the regions of North Canada, Europe

and South Africa.

2.3.32. Currently, the import duty of wood pulp in India stands at 5.28% while it is exempt in competitor

countries like China, Taiwan, Thailand, Pakistan, among others. Hence, domestic manufacturers are

at a disadvantage as compared to their global counter parts. Reduction in import duty will enable

VSF/VFY manufacturers to lower their cost of product by Rs 2 per kg thus enabling them to compete

effectively in global markets.

2.3.33. Import of high quality wood pulp would lead to production of high quality products across the entire

textiles value chain. If the government decides to waive off customs duty on wood pulp on 140 mn kg

it would result into a loss of revenue to the tune of Rs 280 mn. However, doing so would ensure

increase in production throughout the value chain thereby increasing excise duty collections.

COST RELATED ISSUES

2.3.34. India stands to lose in front of other competitors, as costs of manufacturing man-made fibres and

textiles in India are much higher than in competing countries due to a number of factors. These

include power cost, transaction costs, amongst others.

2.3.35. Though in actual terms, labour costs in India may be slightly lower than in other countries, taking

productivity into consideration, the effective labour costs in India turns out to be much higher than in

other countries. Labour in China is considered to be around 60% more productive than in India. Thus

overall labour costs on a per unit basis turn out to be cheaper in China.

2.3.36. Power costs in India at US $ 0.112 per kwh are much higher than the power cost of US $ 0.062 per

kwh in countries like Korea. The power sector in India is in a poor state marred by shortages and

fluctuations in voltages, load shedding and others. To tide over the power scenario, a number of

larger players in the industry have set up captive power plants, which further adds on to the capital

costs of the players.

154

Exhibit 2.3.16: Power cost comparison

Source: ITMF

2.3.37. Capital interest rate in the range of 11 – 13.5% in India is still higher compared to countries like China

and Korea, but is comparable to the interest rates prevailing in Bangladesh, Pakistan and Indonesia.

The higher interest rates affect the competitiveness of the Indian textile industry including MMF

industry.

Exhibit 2.3.17: Lending rates comparison

12

13

11

6

6

12

0 2 4 6 8 10 12 14

India

Pakistan

Bangaldesh

China

South Korea

Indonesia

Lending rates (%)

Source: Central Banks, D&B India

HIGH TRANSACTION COSTS

2.3.38. Another major concern for the industry in India are the relatively higher transaction costs compared to

other countries which whom India is competing in the export markets. Transaction costs for exports in

India stands at US $ 945 per container as compared to US $ 500 per container for China.

2.3.39. These high transaction costs adversely impact India’s cost competitiveness in the export markets. The

factors that lead to the relatively higher transaction costs are multiplicity of rules and regulations,

155

inadequate infrastructural facilities and thus higher inland transportation costs and higher port and

terminal charges, rule-bound administrative procedures, practices, amongst others. Hence in addition

to addressing the various other trade policy issues, reduction of transaction costs is another priority

area that needs to be addressed.

Exhibit 2.3.18: Transaction cost comparison

Source: World Bank

2.3.40. Inadequate infrastructural facilities are one of the major factors for higher transaction costs. Inland

transportation & handling costs and ports & terminal handling costs account for almost 50% of the

total transaction costs reflecting the poor state of infrastructural facilities in the country. Again

depending on the location within the country, transportation costs tend to vary drastically. This is

captured in the exhibit below, which clearly states that the cost to export from Kochi, a port city is US$

432 per container, while the cost from an inland location, Jaipur in Rajasthan, is almost thrice at US $

1,289 per container.

Exhibit 2.3.19: Inter country cost comparison

Source: World Bank

156

2.3.41. The un-neutralised state level taxes such as CST, VAT, Octroi and Entry Tax also contribute to the

higher transaction costs. Though there are drawback schemes and excise rebates available for

exports, it generally takes a long time for the exporters in getting their drawbacks and excise rebate

claims, thus leading to higher transaction costs.

SUMMARY

2.3.42. From the above analysis, it is clearly evident that MMF and MMF textile industry face several

problems that require immediate policy attention if the sector has to be made globally competitive.

The next chapter details various policy recommendations that can provide solutions to the issues

highlighted in this chapter.

157

2.4. RECOMMENDATIONS

2.4.1. The policy recommendations made by the sub-group on man-made fibres for the national fibre policy

can be categorised into two types, namely:

Fiscal measures, and

Non fiscal measures

2.4.2. Fiscal measures mainly include rationalisation of the current duty structure, both excise and customs,

and removal of anomalies, if any. The objective of these measures is to attain fibre neutral duty

regime and do not put any segment of the value chain at any disadvantage. These measures are of

utmost importance to boost production and consumption of MMF and MMF textiles in India and also

improve competitiveness of players in the global exports markets.

2.4.3. Non-fiscal measures are also required to provide boost to the production and consumption of man-

made fibres and textiles in India. These measures take the form of any institutional support and

incentives to encourage domestic production of fibres to ensure adequate supply of fibres to the

industry over the long term.

Various fiscal and non-fiscal recommendations are discussed below.

FISCAL MEASURES

Excise duty rationalisation

2.4.4. The sub-group members are of the opinion that there should be fibre neutral excise policy. Thus,

members have suggested a reduction in excise duty for man-made fibres and textiles made of man-

made fibres to the level of cotton textiles, i.e. 4% optional at present.

2.4.5. It has been observed that when the excise duty on most man-made fibres was reduced considerably

in FY07 from 16.32 % to 8.16% and the excise duty gap between cotton and MMF was narrowed to

8.16 percentage points from 16.32, there was a substantial growth in consumption as well as

production of man-made fibres.

158

Exhibit 2.4.1: Growth in MMF consumption

Source: Ministry ofTextiles, D&B India

Exhibit 2.4.2: Effect of excise duties on production and consumption – PSF

Source: Ministry of Textiles, D&B India

Exhibit 2.4.3: Effect of excise duties on production and consumption – PFY

Source: Ministry of Textiles, D&B India

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2.4.6. Recommendations

a) There should be fibre neutral excise policy and current discrimination in excise duties

between natural and man-made fibres need to be eliminated. Thus, it is recommended that

excise duty for man-made fibres and textiles made of man-made fibres be brought down at

par with cotton textiles, i.e. 4% optional.

b) Excise duty for specialised MMFs which are not produced indigenously should be exempted

Customs duty rationalisation

2.4.7. There are differences of opinion with respect to import duties on man-made fibres. While the MMF

users desire a further reduction in customs duty to get import of man-made fibres at affordable rates,

MMF producers desire an increase in customs duty for protection against cheaper imports from

competing countries like China, South Korea, etc. MMF attracts basic custom duty of 5% (however,

effective customs duty after considering anti-dumping duty becomes as high as 30%). The position is

compounded further due to limited number of MMF manufacturers in the domestic market. Thus, there

is a suggestion to at least remove the special additional duty (SAD) on the man-made fibres (currently

4%) to bring down the prices to certain extent.

2.4.8. With respect to import duty structure on raw materials, there is a general agreement amongst

members that raw materials and additives with high duties (especially those with higher duties than

the finished product) need to be lowered.

2.4.9. In case of rayon grade wood pulp, most producers of viscose fibre desire an exemption in customs

duty on RGWP as high quality wood pulp required for manufacturing VSF/VFY is largely imported and

high duties on same increase the cost of production considerably, thereby lowering their

competitiveness in the global markets. Since RGWP is exempted from customs duty in most

competing countries and is a critical input for manufacturing of VSF/ VFY, customs duty on RGWP

needs to be exempted.

2.4.10. In case of titanium di-oxide (TiO2), the Synthetic Fibres Industry (Manufactured Fibres) need Anatase

grade of TiO2, which is not domestically available and since it is a proprietary item in terms of

technology, it has to be imported compulsorily from the Machinery / Technology suppliers. It is thus

desired that the import duty on Anatase grade of TiO2 (HS code 28230030) should be reduced or

brought down to zero.

2.4.11. Similarly the Spin Finish Oil is not locally available. The import duty on this should not be logically

above that in case of the machinery which is 5%. The duties can also be brought down to zero as it

does not hurt the local industry. However, at present Spin finish oil is clubbed along with surfactants

under the HS codes and hence it is difficult to provide any duty concessions only for spin finish oil

used by the textile industry. A separate code, namely 34031200 has already been suggested by the

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industry association and endorsed by the Department of Chemicals and Petrochemicals for this

purpose.

2.4.12. Recommendations

a) Removal of 4% Special Additional Duty (SAD) on import of man-made fibres to make the

same available to domestic consumers at competitive prices.

b) Customs duty exemption on specialised MMF which are not produced indigenously, namely:

Acetate fibre (HS code – 55049010)

Acetate filament yarn (HS code – 540342)

Tri-acetate fibre (HS code proposed - 55049011)

Tri-acetate filament yarn (HS code proposed - 54033310)

Cuprammonium filament yarn (HS code – 54033910)

Cuprammonium fibre (HS code proposed – 55049040)

Nylon 66 (HS code proposed – 55031110, 54025110)

Nylon 11 (HS code proposed – 55031120, 54025120)

Spandex fibre (HS code proposed - 55039030)

Spandex filament yarn (HS code – 54024400)

PVA fiber (HS code proposed – 55039030)

PVA filament yarn (HS code proposed - 54026960)

PBT yarn (HS code proposed– 54026970, 55039040)

Modacrylic staple fibres (HS code proposed - 55033010)

Modacrylic filament yarn (HS code proposed – 54026940)

PTET (HS code proposed – 54026980, 55039050)

c) With respect to import duty structure on raw materials of man-made fibres that are primarily

imported, raw materials and additives with high duties (especially those with higher duties

than the finished product) should be lowered. Specifically, customs duty on following items

require revision:

Customs duty on rayon grade wood pulp (HS Code 47020000) to be exempted from

existing 5%.

Customs duty on titanium di-oxide (Anatase grade) with HS code 28230010 to be

reduced to nil from current 10%.

Customs duty on Spin finish oil to be reduced to nil from current 7.50%. Currently

import of spin finish oil gets clubbed with surfactants used in other industries under

HS code 34031100. The industry has suggested amendment of HS code for spin

finish oil used by synthetic fibres to 34031200.

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Textile industry to be kept out of GST

2.4.13. At present, Cenvat on textile industry is only optional and many manufacturers opt for non-payment of

Cenvat. Considering the pattern of manufacturing and trading in decentralised sectors of the industry

and finding out solution to avoid double taxation, it is recommended that GST should not be imposed

on textiles industry for at least two years.

Export incentives for MMF textiles and garments

2.4.14. Historically, MMF textiles have had a disadvantage against cotton textiles due to which

competitiveness of MMF textile players has been affected, especially against competing neighbouring

countries. Thus, it is recommended that various export incentives should be provided to man-made

fibre based textiles and garment exporters for a limited period to neutralize the impact of cost

disadvantage vis-à-vis exporters in competing countries. This could include higher drawback rates

and inclusion of value added MMF products, viz. processed fabrics, made-ups and garments under

the Focus Product Scheme.

a) A graduation scheme for three years can be introduced under the Focus product scheme with

benefits of 10% in first year, 7% in second year and 3% in third year.

b) This scheme may cover man-made textiles and garments. In case financial implications do

not permit coverage of textiles and garments then at least garments sector should be

incentivised as these currently constitute for low exports value.

NON-FISCAL MEASURES

Schemes for capacity expansion and up-gradation of machinery

2.4.15. At present, TUFS is available to the textile industry for up-gradation of machinery; however under

TUFS, all the segments of the textile industry including VSF and VFY are covered except

manufacturing of synthetic fibres and yarn (i.e., PSF, PFY, NFY, ASF, PPSF, PPFY etc.) as the latter

is administered by the Ministry of chemicals and petrochemicals. Given that man-made fibres are

used by the textiles industry, incentives provided to MMF industry for technological up-gradation will

ultimately benefit the user industry.

2.4.16. It is recommended that synthetic fibres should be covered under TUFS with fund support from their

administrative Ministry i.e. Department of Chemicals and Petrochemicals.

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a) The machinery for manufacture of synthetic fibres post polymerisation may be covered under

TUFS. Since the processes upto polymerisation are primarily chemical in nature

polymerisation machineries may not be covered.

b) The post polymerisation machinery may be benchmarked by TAMC in consultation with

proposed advisory council on MMF.

c) To encourage setting up of small size units, particularly from chips the restriction on term loan

and also on capital cost may be fixed by IMSC in consultation with TAMC and proposed

advisory council.

The coverage under TUFS will result in attracting more investments, entry of more players, increasing

the availability of MMF at competitive prices.

Setting up of MMF advisory council

2.4.17. A MMF advisory council with all the stakeholders may be set up to monitor that the excise duty and

other concessions have been passed on by the MMF manufacturers and also to take on integrated

approach to solving the problems of MMF producers and users of MMF and to accelerate their

growth. The said Council may also impress upon MMF manufacturers to provide the MMF at

international prices to the domestic manufacturers.

Consultation with Ministry of Textiles for Anti dumping duties

2.4.18. At present, there are apprehensions amongst MMF textile players that often anti-dumping duties are

levied on man-made fibres without adequate consultation with the concerned user industry. In order to

redress the grievances of the user industry, it is recommended that introduction of anti-dumping duties

on man-made fibres must involve consultation with the Ministry of textiles to truly reflect the concerns

of the user industry. At present this is restricted to Department of Chemicals and Petrochemicals.

Institutional support for initiating anti-dumping proceedings

2.4.19. The users of man-made fibre generally constitute small players who are not able to initiate anti-

dumping proceedings for their products, as it involves huge costs. Thus, there is a need for

introduction of an institutional mechanism to provide support (financial and other) to industry

associations to initiate and defend the anti-dumping proceedings / safe guard duties.

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Priority in gas allocation to processing units

2.4.20. MMF manufacturing and processing units are generally more energy intensive and thus to ensure

cleaner environment, it is recommended that these units should be given a priority under the gas

allocation policy, at par with the power sector. This would reduce their dependence on coal and thus

contribute towards greener environment.

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2.A. ANNEXURE

2.A.1. TEXTILE OVERVIEW AND POLICIES IN MAJOR COUNTRIES

China

2.A.1. China is the single largest T&G producer and exporter in the world. It has the largest T&G production

capacity and leads in the production of cotton as well as synthetic textiles and garments. It is

endowed with a good raw materials base and enjoys the advantage of abundant availability of low-

cost labour. Chinese T&G suppliers are able to produce any type of textile and garment item at

competitive prices. The Chinese textile industry has also benefited from huge investments from the

government as well as from foreign companies, which have boosted its production capacity to

massive levels.

2.A.2. China is the single largest exporter of PFY, VFY and VSF. It is the second largest exporter of PSF

and third largest of nylon. In terms of consumption, China consumed around 50% of global textile

fibres in 2007.

2.A.3. China has a greater advantage against other low-cost countries as labour productivity is very high.

Further, the entire textile value chain is well integrated in China, which ensures a highly efficient

supply chain in the industry. China’s infrastructure is also well developed in comparison with other

competing countries. One of the key reasons for success of Chinese textile industry has been the

continuous government support for the industry. During the last decade, textile industry in China has

seen huge investments in capacities and technology up-gradation. Currently, China boasts of more

than half of world’s MMF capacities.

2.A.4. On the cost front, Chinese are competitive on most factors. Chinese labour cost is low at around US$

125 per month; power cost is US$ 0.2 per kwh (Y 0.485 per kwh in 2005), water cost is 0.625 US$ per

ton cubic mtr; diesel/ petrol costs around 4 yuan per litre; freight charges are about US$ 2000 for 20 ft

container from China to USA; and interest cost is almost half that of India (around 6%).

2.A.5. Government policies for Chinese textile and MMF industry

a) Promotion of MMF: Chinese government recognised that cotton production was not sufficient

to meet the textile demand in the long run and thus they actively promoted the MMF industry.

b) Cheaper finance: The industry can avail finance at interest rates as low as 5-6%

c) Subsidies: Chinese textile industry receives capital subsidies in the form of land grants;

wherein the land is provided to industries at cheap rates or free of cost. Textiles sector also

gets fuel subsidies (for coal and oil)

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d) Tax exemptions: Chinese government provides tax holidays upto two years for the industry.

e) Export incentives: The VAT on Chinese textiles is 17%. But exporting units are eligible to get

refund up to 16% (as per the latest revision under the stimulus package of 2009).

f) Duty free imports: On certain textile machinery, no customs duty is levied.

g) Flexible labour policy: In China, labour can be employed on contractual basis

h) Infrastructure support: Chinese government has made huge investments to create world-class

infrastructure for its industries in the form of ports, roads, highways, special economic zones,

etc.

i) Financial support: The Chinese government allocated Y 1.36 billion to the T&G industry in

2006 to improve productivity of which Y 560 million were to promote innovation and the

remaining amount to support enterprises to invest in developing and least developing nations.

2.A.6. On the back of favourable conditions, the exports from Chinese T&G companies have proliferated in

the post-quota period. According to a study by the WTO, China has the potential to garner 50% of the

US market for garments and 29% share of the EU market for garments.

Taiwan

2.A.7. Taiwan accounted for 6% of the world’s manmade fibres output with a production of 2.45 million

tonnes of manmade fibre in 2007. It is the third largest producer of nylon and polyester filament yarn,

fourth largest manufacturer of viscose staple fibre and holds the fifth and sixth position in the

production of acrylic staple fibre and polyester staple fibre. Taiwan’s share in world market has

steadily come down since 1990 when China started ramping up its capacity. It accounted for almost

14% of the world fibre production in 1995, however low growth (around 2%) during the ATC period

(1995-2004) and decline in production post –WTO, led to decline in share of Taiwan in world fibre

production.

2.A.8. Taiwan is a net exporter of fibres, with exports accounting for almost 55% of its total production during

2007. Nearly 78% of ASF production and 71% of PSF production and around 45-50% of its production

of nylon and PFY were exported during 2007. However, Taiwan reported a decline in exports of fibres

to 1.3 million tonnes in 2007 from 1.5 million tonnes in 2006.

2.A.9. In terms of consumption, Taiwan ranks as the third largest consumer of nylon and polyester filament

and sixth largest consumer of viscose staple fibre.

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2.A.10. With a total production capacity of around 8,670 tonnes per day, Taiwan ranks third largest in terms of

capacity. 21

It ranks second in terms of capacity for polyester fibre.

2.A.11. Over the years, the industry witnessed many problems in the second half of 1980s, such as labour

shortages, rising overhead costs, increasing land prices, amongst others. As a consequence a

number of companies relocated/shifted their production capacities to South East Asia and China in

order to stay competitive. The companies that did not shift their production capacities undertook a

number of cost-effective measures and new management practice to improve quality and productivity.

Taiwan has emerged as a leading producer of high-quality textiles and as a sourcing centre in Asia.

The textile industry in the country has focused on manmade fabrics as the country does not produce

natural raw materials such as cotton, wool, silk, linen and others.

2.A.12. Taiwan had build up production capacities in man-made fibres and China was one of its major

markets. However, with number of MMF units increasing in China, demand for MMF from China

reduced, impacting demand from Taiwan. The Asian economic crisis of 1997 hit the industry very

badly. MMF production in Taiwan fell in 1998 and a number of firms were hit badly.

2.A.13. Liberalisation of textiles and clothing trade (on account of expiry of the WTO Agreement on Textiles

and Clothing) led to increased competition in export markets as a result of which Taiwan’s exports of

textiles and clothing declined. To help the T&G industry overcome this challenge, the Taiwanese

government set up a co-ordination centre to eliminate investment barriers and provide support for

technological development.

Indonesia

2.A.14. Indonesia’s textile industry is vertically integrated with presence across the entire value chain – from

production of MMFs, yarn spinning, waving and knitting, dyeing, printing, finishing to garment

manufacturing. Out of the 2,661 textile companies in 2004, 28 were involved in manufacture of MMFs,

204 in spinning, 1,044 in weaving, knitting and finishing and 861 in garment manufacturing. The

industry provided employment to over 1.8 million workers directly and 3.7 million workers indirectly.

Workers in the textiles industry accounted for 1.9% of total employment in the region. The textiles

industry is second largest net exporter industry (after mining) in Indonesia. However, a large part of

textile products produced in the region is consumed domestically. Around 51% of yarn produced was

consumed domestically; in case of weaving and knitting sector the local consumption is around 63%

of total production, and for garments – 37%.

21

As per Taiwan Man-Made Fiber Industries Association - http://www.e-ruby.com.tw/tmmfa/english/1-brief05.asp#1

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2.A.15. Indonesia’s strategic location of being situated between two oceans (Indian Ocean and Pacific Ocean)

and continents (Asia and Australia/Oceania) has enabled it to engage in trade with various nations.

Indonesia is the fourth largest populated nation in the world. The government, in a bid to increase

competitiveness of the textiles industry, has made significant efforts so as to provide requisite

infrastructure and facilities. Indonesia was one of the largest exporters of MMF in 2007 .The region

was third largest exporter of PFY, fifth largest of VFY and tenth largest of NFY.

2.A.16. Indonesia’s domestic industry began to develop only in the late 1960’s and since then industry has

made progress in terms of overall structure, market orientation and diversification. The initial industrial

policies in the rehabilitation and stabilisation period (1967-72) and oil boom period (1973-81), stressed

on growth of import substitution industries like textiles and garments. With fall in oil prices during the

period 1982-96, Indonesia’s policy focussed on development of export oriented industries which

would be supported by strengthening the overall industry structure.

2.A.17. The Indonesian government, in a bid to improve foreign investments in the textiles industry,

announced an investment policy package. This policy package consisting of 19 policies and 85 action

programs, defines the shortening and transparency of investment permits procedures as well as

establishment of mechanisms for disputes. The government is also trying to amend its existing labour

law. Indonesia economy suffered a major setback in 2008 in form of falling exports (due to tepid

demand for textile products in international markets). However, the region depends more on

household consumption for growth as compared to exports. Indonesia is developing textiles cluster in

the regions of West Java and Yogyakarta wherein focus will be on increasing competitiveness by

concentrating on development of value added products and fashion wear products manufactured from

indigenously available raw materials.

2.A.18. As per industry experts, around 70% of PFY manufactured in Indonesia is used for georgette crepe,

as a result of which, demand for PFY for weaving remains stagnant. Demand for filament yarn is

better relatively better from knitted fabrics as compared to woven fabrics. Indonesia’s textiles industry

contributed around 2.1% to its GDP in 2008.

2.A.19. Comparison of cost of production of India vis-à-vis Indonesia reveals – hourly labour cost is cheaper

by US$ 0.1, cost of power is cheaper by US$ 0.019 per KW and the cost of shipping is also cheaper.

The transaction cost for yarn and fabrics in Indonesia account for 1.5-2% and 1.25-1.5% respectively

of their selling price.

2.A.20. Indonesia accounted for 4% of global production of MMFs and 3% in global consumption of MMFs in

2007. The region was the second largest consumer of VSF, fifth largest of PSF and seventh largest

consumer of ASF and PFY in 2007. Indonesia produced around 1.6 million tonnes of MMFs in 2007 of

which 0.7 million tonnes was PFY, 0.5 million tonnes was PSF and 0.3 million tonnes was viscose

staple. Despite this impressive growth adverse factors like outdated technology and machinery

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continue to hamper the growth of textiles industry in Indonesia. Few of these factors have been listed

down as follows:

a) Entry of illegal textiles products into Indonesian markets

b) Emergence of new competitors like Vietnam, Bangladesh and Pakistan

c) Limited development of natural fibre raw material

d) No development of textile-chemicals industry (dyestuff)

e) Limited availability of human resources especially in the field of designing, marketing and

research and development

f) Amendments in Act of Manpower especially with respect to separation pay, creating

unnecessary burden to the industry

g) Limited development of supporting industries like accessories, interlining, spare parts and

suppliers (like paper cone, bobbin, etc)

2.A.21. In a bid, to enhance the competitiveness of its domestic textiles industry with other nations and

increase employment opportunities, Indonesia strengthened its production capacity across the entire

value chain in 2007. Highest growth was witnessed in fibre (6.8% y-o-y growth), followed by yarn

(4.3%), garments (3.3%) and fabrics (1.3%).

2.A.22. Government policies/initiatives for Indonesian textile industry:

a) Drawback of import duty paid on import of raw materials required to manufacture finished

textiles products

b) Domestic manufacturers are exempt from value added tax and sales tax payable on

procurement of indigenous raw materials for manufacture of products supposed to be

exported

c) Restricting imports of textile products to protect domestic manufacturers from cheap imports

d) The government is supporting the industry in upgrading machineries used. The government is

urging players to replace excitant machineries with new and modern machineries which are

more efficient

e) The Indonesian government sought help of the Chinese government to restructure its textile

policy. The government also proposed to the Chinese government for the provision of export

credit licences to textile machinery

f) Amend laws and regulations hampering development of textiles industry

g) Implement restructuring program for textile products and machinery used

h) Increase availability of domestic raw materials

i) Develop high quality natural and synthetic fibre industry

j) Focus on improving design, technology and product diversification so as to manufacture value

added products

k) Obtain intellectual property

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South Korea

2.A.23. South Korea’s textile industry ranks fourth globally in terms of production. Textiles output accounted

for around 6% of the regions total output in 2003. Various products manufactured in the South Korean

textiles industry include wovens, fabric manufacturing, MMFs, dyeing and processing and garments.

Manufacture of value added products account for 6.5% of total textiles production in the region. The

industry provides employment to over 3 million people accounting for 12% of overall employment in

the region.

2.A.24. As per the country statements provided by ITMF, number of spindles in South Korea stood at 12

million in 2006 and 731 looms in the same period. Exports of textiles products have played a major

role in boosting the regions economy. The region ranked seventh for exports of textiles machinery

with exports exceeding US$ 1 billion.

2.A.25. South Korea was the fourth largest manufacturer of nylon and PFY in 2007, fifth largest of PSF and

sixth largest of VFY. The region accounted for 3.5% of global supply of MMFs. In terms of

consumption, South Korea was the fourth largest consumer of PFY, fifth largest of VFY and seventh

largest of nylon. South Korea was a leading exporter of VSF in 2007. The region was sixth largest

exporter of PFY, eight largest of nylon and ninth largest of ASF in the same period. On the cost front,

power cost (US$ 0.05 per KW) is almost 48% cheaper as compared to India and shipping costs are

25% lower.

2.A.26. South Korea’s MMF production has lately been declining. The region reduced its capacity for

manufacture of MMFs by 12.7% in 2007. While capacities of ASF and PSF remained unchanged in

2007, that of NFY reduced by 1.2% in the same period. In the period of early 1990s, the region’s MMF

production grew by 7% p.a. with production of PFY and PSF growing by 13% and 4% respectively.

However, the pace of growth reduced in the ATC period with MMF production growing at 2.5% p.a.

and PFY and PSF growing by 5% and 2.5% respectively. In the period of post abolition of quotas,

production of all MMFs except VFY declined. Production of ASF declined by 30%, followed by PFY

(16.2%), nylon (12.2%) and PSF (1.6%). Production of VFY grew marginally by 0.8% during the same

period.

2.A.27. The South Korean government is now focussing on production of value added products like

nanofibres, industrial textiles and smart textiles for growth. The region is also acquiring new

technology like digital dyeing and printing processes to enhance its competitiveness in global markets.

Government policies for South Korean textile and MMF industry:

a) South Korea, in a bid to support various regional industries like textiles and to support the

growth of SMEs (small and medium size enterprises), set up a regional industrial promotion

project (RIPP). This project encourages development of regional SME focussed industry by

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identifying an industry having attractive growth potentials in regions and thereby assisting in

formation of a cluster. The first stage of this programme supported textiles industry in four

regions for a period of five years (1999-2003) with an investment of US$ 1.89 million.

Vietnam

2.A.28. The textiles industry in Vietnam has received a major boost since the regions recent entry into the

World Trade Organization. The region which initially restricted itself to cut and sew operations is now

investing in areas of spinning and weaving. With its entry into WTO, Vietnam is now in a position to

enhance value of its textiles exports. Also, the United States would be removing quotas on imports

from Vietnam leading to increased demand from the US for Vietnamese textile products. By the end of

2008, Vietnam became tenth largest exporter of garments valued at US$ 9.05 billion (a 16.3% y-o-y

growth over 2007).

2.A.29. The region has set an export target of US$ 10 billion for 2010 (Vietnam’s textile exports were US$ 4.8

billion in 2005). Vietnam plans to achieve the set targets by streamlining production and reduce per

unit cost and thereby increase its competitiveness in the international arena. Vietnam has made

substantial investments in the textiles industry to achieve this target. In 2006, Vietnam added 1.7

million new spindles and 5,840 open-ended rotors. Around 8.4 spindles and 19,784 open-ended

rotors were added in the period 1997-2006. In weaving segment, the region added 1,357 shutleless

looms in 2006.

2.A.30. In 2008, textiles industry emerged as Vietnam’s largest industry comprising of over 2,000 textile

manufacturers (of which 50% were state owned, 25% private firms and remaining foreign invested)

providing employment to over two million workers.

2.A.31. Government policies/initiatives for Vietnamese textile and MMF industry:

a) The government has announced plans of setting up of textiles and dyeing industrial zones

having standard watershed treatment systems, to attract more investments (both domestic

and foreign), to invest in the areas of fabric printing and dyeing so as to meet the target set by

the government of manufacturing one billion meters of fabric.

b) The government has announced plans for setting up of a laboratory at the Textile and

Garment Institute which would certify products manufactured and sold/exported were safe.

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Pakistan

2.A.32. Pakistan’s T&G industry is vertically integrated with presence across the entire value chain – from

ginning, spinning, weaving, finishing to garment manufacturing. The industry provides employment to

ten million people. The T&G industry accounts for 11 percent of the country’s GDP.

2.A.33. Pakistan’s textiles and garments industry is primarily cotton based as this region is one of the leading

cotton manufacturers in the world. The country is fourth largest producer and third largest consumer

of cotton in the world. Lately, Pakistan’s T&G industry has diversified its product basket to include

MMF based textiles and apparels in order to align themselves with changing global consumption

pattern. Abolition of quotas in 2005 was one of the main reasons behind Pakistan’s shift towards

MMFs in order to remain competitive in international markets.

2.A.34. Pakistan’s production of MMFs posted an impressive growth in the ATC period especially polyester

staple fibre. Capacity of polyester staple fibre grew at a CAGR of 4.1% from 392 mn kg in 1995 to 565

mn kg in 2004. Pakistan started the indigenous manufacture of viscose staple fibre only in 2002 by

setting up of a manufacturing unit of 25 mn kg.

2.A.35. Government policies/initiatives for Pakistani textile and MMF industry as announced in the textiles

policy of 2009-14:

a) A Textile Investment Support Fund (TISF) will be setup for providing incentives for

investments in areas like modernization of technology and machinery, enhancing skill sets of

labourers, removal of bottlenecks in infrastructure, effective marketing and usage of

information and communication technologies.

b) Government, for capital intensive projects, will bear 50 percent of interest costs of

investments in plant and machinery with maximum of five percent. For other smaller projects,

government will contribute an amount upto 20 percent of capital cost as a grant. Government

has earmarked an amount of Rs 1.6 billion for this scheme and the amount will further

increase to Rs 17 billion by 2014.

c) Development of clusters to enable small investors set up their manufacturing units. Provision

of facilities like laboratories, product development centres, research centres, etc to these

clusters.

d) Assistance in setting up of effluent treatment plants to existing manufacturing units.

e) Provision of support for branding , grading, labelling, etc to add vale to the entire T&G

industry’s value chain

f) Government will launch specific schemes, mainly on public-private partnership basis, to

upgrade and improve segments like ginning, weaving, knitting, processing, technical textiles,

carpets, handloom and handicrafts, fashion designs, etc.

g) Provision of incentives for production of contamination free cotton.

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h) Development of skills and research through SFDAC (Synthetic Fibre Development and

Application Centre) for manufacture of finer filaments for production of value added products.

i) Encouraging investments in rotor technology and specialized attachments like spandex, compact

spinning, etc so as to attain economies of scale.

j) Incentivizing power generation by mills so as to overcome problems of power shortage

k) In areas of weaving and knitting, government would provide financial assistance for

increasing capacities and upgradation of technologies. To encourage investments in shuttle

less looms, knitting and power looms sector, government would provide not only financial but

also technical assistance.

l) In order to boost production of value added products (especially non-wovens) government

would develop training modules to impart knowledge and skills.

m) Export refinance to be available at 5 percent

n) Long term loans to be converted on same price as applicable to LTTF scheme so as to

mitigate the burden of financing cost on existing units. An amount of Rs 5 billion has been

earmarked for this scheme.

o) Provision of duty drawback to offset costs imposed on exporters of value added textiles for a

period of two years. Drawback scheme proposed is as follows:

1 percent of FOB value of exports of processed fabric

2 percent of FOB value of exports of home textiles

3 percent of FOB value of exports of garments

p) Provision of additional 1 percent duty drawback to exports who have registered a growth in

exports over 15 percent

q) Government has earmarked an amount of Rs 5.4 billion to clear previous dues under R&D

scheme

r) Government is considering monetization of customs duty of PTA so as to increase usage of

MMFs and thereby diversify export offerings

2.A.2. DEMAND PROJECTIONS

2.A.36. The demand for man-made fibres depends upon the demand for yarns and fabrics, which in turn

depends upon the consumption of finished textiles viz. apparel and made-ups. Thus, in order to

determine the future requirements for man-made fibres/ filament yarns, we first need to assess

demand for fabrics and finished textiles made from man-made fibres, both for the domestic market as

well as exports.

2.A.37. The future projection for demand for man-made fibre/ filament yarn is arrived by assessing the

demand for future textile consumption by the Indian households and non-households and the export

173

demand for fabrics/ garments made of man-made fibres. Demand for domestic household

consumption of textiles and garments is derived from the projected private final consumption

expenditure based on growth of GDP at about 8% per annum.

2.A.38. India’s GDP factor cost at constant prices for FY08 stood at Rs31,297.2 billion. Considering the GDP

growth of 8% per annum, the GDP is expected to rise to Rs 53,637.8 billion in FY15 and to

Rs 78,811.6 billion in FY20. The average share of Private Final Consumption Expenditure (PFCE) in

the GDP during the last five years has been 67%. Considering the same share of PFCE in FY15 as

well as FY20, the overall private final consumption expenditure would be worth Rs 35,937.3 billion in

FY15 and Rs 52,803.8 billion in FY20.

2.A.39. The Eleventh five year plan report of the planning commission for Textiles and Garments considers

the share of textiles and clothing in PFCE to be around 5.5% for FY08. It has been observed that over

the past few years, the relative share of textiles and clothing in total PFCE has come down due to

increased private expenditure on transport and communication, education, recreation, etc. Thus, we

have considered the share of textiles and clothing in the PFCE to be 5.3% for FY15 and 5.1% for

FY20. Accordingly, the consumption of textiles and clothing by domestic households in FY15 and

FY20 is projected to be Rs 1,904.7 billion and Rs 2,693 billion, respectively. This is equivalent to

fabric consumption of 60,466 million sq. mtrs in FY15 and 85,492 million sq. mtrs in FY20.

2.A.40. Non-household consumption of fabrics (in form of fabrics, garments and made-ups) has been

estimated in the eleventh five year plan at 13,158 million sq. mtrs in FY07 and projected to rise at 5%

per annum. Considering the same growth estimates for next 5-10 years, the demand for fabrics from

non-household is expected to reach 19,440 million sq mtrs in FY15 and 24,811 million sq mtrs in

FY20.

2.A.41. The domestic demand for fabrics (in form of fabric, garments and made-ups) for exports was

estimated in the Eleventh Five Year Plan at 12,740 million sq mtrs for FY07. The exports of fabrics

and finished textiles have grown at average annual growth of around 9% till FY09. We have

considered the demand for fabrics for exports to grow at around 10% per annum for next 5-10 years.

On the basis of these growth estimates, the demand for fabrics for exports would be 27,930 million sq.

mtrs in FY15 and 44,982 million sq. mtrs in FY20.

2.A.42. The total demand for fabrics would thus be 107,836 million sq mtrs in FY15 and 155,285 million sq.

mtrs in FY20.

174

Exhibit 2.A.1: Projections for fabric demand

Parameter Unit FY15E FY20E CAGR %

GDP Rs million 53,637,849 78,811,598 8

PFCE share in GDP % 67 67

PFCE Rs million 35,937,359 52,803,771 8

Clothing share in PFCE % 5.30 5.10

T&G consumption – domestic Rs million 1,904,680 2,692,992

a) T&G fabric consumption -domestic household million sqm 60,466 85,492 7.3

b) Fabric consumption by Non households million sqm 19,440 24,811 5

c) Fabric consumption for export of finished textiles million sqm 27,930 44,982 10

Total fabric consumption (a+b+c) million sqm 107,836 155,285

E- Estimated

Source: D&B India

2.A.3. DEMAND PROJECTIONS FOR MAN-MADE FIBRES

2.A.43. The total fabric demand estimated above can be segregated in terms of various fibres based on the

average past proportion of fabrics production in terms of different fibres.

Exhibit 2.A.2: Composition of fabric production by fibre type (%)

Fabric type FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08

Cotton 48.4 49.0 47.0 46.0 42.6 45.5 48.2 49.1 48.5

Blended 15.1 15.8 15.0 14.0 14.3 13.3 12.7 12.9 12.3

100% Non cotton 35.0 33.8 36.5 38.4 41.6 39.7 37.6 36.6 37.8

Khadi, Wool, Silk 1.5 1.4 1.5 1.6 1.6 1.5 1.6 1.4 1.4

Note: FY09 was an exceptional year as it saw a decline in fabric production due to recession. Thus, it has not been considered for projections

Source: Office of Textiles Commissioner, D&B India

175

2.A.44. It can be observed that while share of cotton fabrics is declining, that of MMF based fabrics is rising.

Based on the past trend, we have arrived at likely future composition of fabric in terms of different

fibres. On the basis of this, the demand for blended fabrics is estimated at 13,480 million sq mtrs in

FY15 and 19,721 million sq mtrs in FY20 and demand for 100% MMF based fabrics is estimated at

45,507 million sq mtrs for FY15 and at 70,189 million sq mtrs in FY20.

Exhibit 2.A.3: Projected composition of fabric by fibre type in India (%)

Fabric type FY15E FY20E

Cotton 44.0 40.8

Blended 12.5 12.7

MMF 42.2 45.2

Silk/wool 1.3 1.3

Source: D&B India

Exhibit 2.A.4: Projected composition of fibre in World (%)

Fibre 2007 2013 2015 2018

Cotton 36.3 32.1 31.9 31.4

MMF 62.0 66.3 66.6 67.3

Wool 1.7 1.5 1.4 1.3

Source: PCI, ASFI-Handbook of Statistics 2008-09(Part 2)

Exhibit 2.A.5: Projected composition of fabric by fibre type (million sq. mtrs)

Fabric type FY15E FY20E

Cotton 47,448 63,356

Blended 13,480 19,721

MMF 45,507 70,189

Silk/wool 1,402 2,019

E- Estimated

Source: D&B India

2.A.45. Utilising the average conversion rates for different fibres, we have arrived at requirements for man-

made fibres for FY15 and FY20 as 3,921.1 million kg and 6,000.6 million kg, respectively.

176

Exhibit 2.A.6: Conversion ratio for textiles value chain

Fibre Fibre to Yarn (kg) Yarn to Fabric (sqm)

Cotton 0.80 12.4

MMF 0.95 13.0

Source: Official Indian Textiles Statistics, Industry

Exhibit 2.A.7: Demand projection for man-made fibres

Fibre FY15E FY20E

MMF yarn from blended fabric* 626.9 917.3

MMF yarn from MMF based fabric 3,500.5 5,399.1

Total MMF yarn 4,127.5 6,316.4

Demand for man-made fibres 3,921.1 6,000.6

E- Estimated; * - Assuming blended ratio to be 40:60 for cotton and MMF

Source: D&B India

2.A.46. From the above projections for man-made fibres, we have further arrived at future demand for

different man-made fibres by projecting future composition of various fibres in total MMF/ filament

yarn consumption based on past trends.

Exhibit 2.A.8: Demand projections for various man-made fibres/ filaments

MMF/ filament yarn

FY15E FY20E

Proportion Mn kg Proportion Mn kg

PSF 28.2 1,105.8 27.3 1,638.2

VSF 9.5 372.5 9.1 546.1

ASF 3.4 133.3 3.0 180.0

PPSF 0.1 3.9 0.1 6.0

PFY 54.3 2,129.2 56.1 3,366.3

VFY 1.7 66.7 1.6 96.0

NFY 1.2 47.1 1.2 72.0

PPFY 1.6 62.7 1.6 96.0

Total 3,921.1 6,000.6

E- Estimated

Source: D&B India

177

2.A.4. FUTURE DEMAND PROJECTIONS VIS-À-VIS EXISTING

CAPACITIES

2.A.47. The future fibre demand for different man-made fibres has been compared with existing capacities.

While the existing capacities for all man-made fibres are higher than the current domestic demand for

same, there is a shortfall in capacities of man-made fibres/ filaments if we consider the future demand

for same.

Exhibit 2.A.9: Future fibre demand and current capacities (million kg)

Fibre

Present FY15E FY20E

Domestic Demand in FY08*

(mn kg)

Existing capacities**

(mn kg) Demand ( mn kg)

CAGR (%)

Demand

(mn kg)

CAGR (%)

PSF 739.1 1,104 1,105.8 6.9 1,638.2 6.9

VSF 250.4 336 372.5 6.8 546.1 6.7

ASF 94.7 105 133.3 5.9 180.0 5.5

PPSF 2.8 5 3.9 5.9 6.0 6.6

PFY 1,280.7 1,763 2,129.2 8.8 3,366.3 8.4

VFY 41.8 64 66.7 8.1 96.0 7.2

NFY 28.7 20 47.1 8.6 72.0 8.0

PPFY 38.0 63 62.7 8.7 96.0 8.0

Total 2,476.1 3,460 3,921.1 8.0 6,000.6 7.7

E- Estimated; * FY09 has not been considered as it was an exceptional year

** Functional Installed capacities by FY09

Source: D&B India

178

2.A.5. ALTERNATIVE SCENARIOS

2.A.48. The above projections for fibre demand have been derived under the assumption of GDP growth of

8%. However, if we consider two alternative scenarios for GDP growth, namely 7% and 9%, the

demand for man-made fibres would be in the range of 3,782 – 4,067.6 million kg for FY15 and 5,651-

6,386.9 million kg for FY20. The detailed break-up of each fibre demand under the two alternative

scenarios has been provided in the tables below.

2.A.49. It can be clearly observed that under both scenarios, current MMF capacities will fall short of demand

for most fibres in a few years.

Exhibit 2.A.10: Future fibre demand and current capacities (million kg) at 7% GDP

Fibre

Present FY15E FY20E

Domestic Demand in FY08* (mn kg)

Existing capacities** (mn kg)

Demand ( mn kg)

CAGR (%)

Demand (mn kg)

CAGR (%)

PSF 739.1 1,104 1066.7 6.3 1542.9 5.8

VSF 250.4 336 359.3 6.2 514.3 5.7

ASF 94.7 105 128.6 5.2 169.5 4.6

PPSF 2.8 5 3.8 5.3 5.7 5.6

PFY 1,280.7 1,763 2053.9 8.2 3170.6 7.2

VFY 41.8 64 64.3 7.4 90.4 6.1

NFY 28.7 20 45.4 7.9 67.8 6.8

PPFY 38.0 63 60.5 8.1 90.4 6.9

Total 2,476.1 3,460 3782.5 7.3 5651.6 6.6



Source: D&B India

179

Exhibit 2.A.11: Future fibre demand and current capacities (million kg) at 9% GDP

Fibre

Present FY15E FY20E

Domestic Demand in FY08* (mn kg)

Existing capacities** (mn kg)

Demand (mn kg)

CAGR (%)

Demand (mn kg)

CAGR (%)

PSF 739.1 1,104 1147.1 7.6 1743.6 6.8

VSF 250.4 336 386.4 7.5 581.2 6.7

ASF 94.7 105 138.3 6.5 191.6 5.6

PPSF 2.8 5 4.1 6.5 6.4 6.6

PFY 1,280.7 1,763 2208.7 9.5 3583.1 8.2

VFY 41.8 64 69.1 8.7 102.2 7.1

NFY 28.7 20 48.8 9.2 76.6 7.8

PPFY 38.0 63 65.1 9.4 102.2 7.9

Total 2,476.1 3,460 4067.6 8.6 6386.9 7.6



Source: D&B India

2.A.6. INVESTMENT REQUIREMENT

2.A.50. The future fibre requirements arrived above is with respect to domestic demand for man-made fibres.

To estimate the future capacity and investment requirements, we also need to consider future exports

and imports of fibres. Based on the historical data trend on exports and imports as a proportion of

domestic demand, we have considered man-made fibre’s exports to constitute 12% of future domestic

demand and imports to constitute 4% of future domestic demand.

Exhibit 2.A.12: Targeted proportion of MMF trade

Trade Targeted Share in domestic demand (FY15 and FY20)

Exports 12%

Imports 4%

Source: D&B India

2.A.51. After adjusting expected exports and imports to demand projections, the future MMF requirements are

in the range of 4,085-4,393 million kg for FY15 and 6,103.8 – 6,897.9 million kg for FY20. Considering

80% utilisation of capacities, additional capacities are required to the extent of 1,646.7 – 2,031.3

million kg by FY15 and around 4,169.7 – 5,162.3 million kg by FY20. This implies investments worth

Rs 82.3 – 101.6 billion by FY15 and Rs 208.5 – 258.1 billion by FY20.

180

Exhibit 2.A.13: Future MMF requirements under different GDP growth scenarios (million kg)

FY15E FY20E

7% 8% 9% 7% 8% 9%

Domestic demand 3782.5 3921.1 4067.6 5651.6 6000.6 6386.9

(+) Exports 453.9 470.5 488.1 678.2 720.1 766.4

(-) Imports 151.3 156.8 162.7 226.1 240.0 255.5

Total fibre requirement 4085.1 4234.8 4393.1 6103.8 6480.6 6897.9

E-Estimated

Source: D&B India

Exhibit 2.A.14: Future investment requirements for man-made fibres

FY15E FY20E

7% 8% 9% 7% 8% 9%

MMF demand 4085.1 4234.8 4393.1 6103.8 6480.6 6897.9

Required capacity (assuming 80% utilisation)

5106.4 5293.5 5491.3 7629.7 8100.8 8622.3

Current capacity 3460 3460 3460 3460 3460 3460

Additional capacity required 1646.4 1833.5 2031.3 4169.7 4640.8 5162.3

Approx. investments (Rs bn) 82.3 91.7 101.6 208.5 232.0 258.1

E- Estimated

Source: D&B India

2.A.52. Besides investments in man-made fibre capacities, huge investments (almost twice the investments

for man-made fibres) would also be required for the raw material manufacturing. Adequate availability

of man-made fibres in the future thus requires huge investments by current and new players, which

can be facilitated by government support in the form of incentives and schemes for accelerating

capacity expansion.

181

2.A.7. STATISTICAL APPENDICES

Exhibit 2.A.15: MMFs snapshot of India’s major competing countries (2007) (million kg)

Fibre Parameter Global China India USA West Europe

South Korea

Taiwan

Acrylic Staple Fibre

Capacity

Production

Export

Import

Consumption

3000

2436

883

907

2460

885

822

3

281

1100

153

81

0

7

88

2

54

54

507

423

273

46

196

58

51

42

4

13

165

157

109

2

50

Nylon Capacity

Production

Export

Import

Consumption

3856

3848

1373

1388

3856

937

862

113

237

1,121

30

27

8

11

31

1,262

940

96

154

1103

552

424

382

437

472

216

184

65

22

102

189

570

211

28

227

Polyester Filament Yarn

Capacity

Production

Export

Import

Consumption

23874

19082

2918

2719

18903

15343

12177

633

253

12,901

1973

1408

220

91

1663

464

379

72

152

459

547

403

301

589

721

709

216

127

1005

1831

1231

550

12

1029

Polyester Staple Fibre

Capacity

Production

Export

Import

Consumption

16840

12677

2433

2457

12859

9708

7000

418

201

6,783

1078

868

138

16

746

934

782

121

393

1,054

383

335

187

733

881

536

439

4

101

906

535

385

6

156

Viscose Filament Yarn

Capacity

Production

Export

Import

Consumption

650

465

174

194

485

300

227

88

13

152

82

65

23

3

44

25

25

1

5

29

85

71

18

70

123

9

0.1

13

22

Viscose Staple Fibre

Capacity

Production

Export

Import

Consumption

3080

2461

481

752

2732

1650

1140

119

39

1060

252

277

25

6

258

2

84

90

420

380

56

178

502

0

37

37

161

136

91

15

61


182

Exhibit 2.A.16: Demand – supply indicators for China (million kg)

Fibre Parameter 2000 2001 2002 2003 2004 2005 2006 2007


Capacity

Production

Exports

Imports

Consumption

606

475

1

353

827

665

519

1

374

892

726

594

1

434

1027

729

628

1

495

1122

689

663

2

460

1121

900

865

2

465

1328

1165

839

3

337

1174

885

822

3

281

1100

Nylon Capacity

Production

Exports

Imports

Consumption

651

390

22

150

518

683

406

22

166

550

697

471

41

217

647

725

559

55

250

755

773

667

58

273

882

867

680

82

264

862

887

834

101

282

1014

937

997

113

237

1121


Capacity

Production

Imports

Exports

Consumption

3584

3152

414

19

3546

4980

3892

290

22

4160

7065

4755

352

32

5074

8122

5643

415

47

6012

11745

6805

369

137

7038

12443

8903

296

261

8938

12367

10295

272

400

10166

15343

12177

253

633

11797


Capacity

Production

Imports

Exports

Consumption

2349

1949

602

2

2548

3095

2417

511

6

2923

3835

2951

594

70

3475

4455

3491

574

113

3951

5800

4347

505

140

4712

7951

4853

344

205

4991

7951

5960

261

285

5936

9708

7000

201

418

6783


Capacity

Production

Imports

Exports

Consumption

108

87

6

24

68

138

125

3

29

99

175

154

5

47

112

223

184

9

56

137

250

200

10

54

156

265

198

9

63

144

270

211

13

85

138

300

227

13

88

152


Capacity

Production

Imports

Exports

Consumption

392

466

41

1

505

525

483

45

0

528

537

528

40

2

566

760

616

56

2

671

900

766

55

12

810

1020

858

50

17

891

1250

968

39

61

946

1650

1140

39

119

1060


183

Exhibit 2.A.17: Demand supply indicators for Taiwan (million kg)

Fibre Parameter 2000 2001 2002 2003 2004 2005 2006 2007


Capacity

Production

Imports

Exports

Consumption

162

106

28

69

65

162

126

14

83

57

162

130

11

94

47

142

135

8

104

39

142

153

7

125

35

165

138

5

102

41

155

155

1

121

34

165

140

2

109

33

Nylon Capacity

Production

Imports

Exports

Consumption

271

436

23

149

310

274

419

20

141

298

272

454

30

189

296

212

463

29

231

261

205

458

31

228

261

199

417

25

209

233

186

423

30

224

230

189

410

28

211

227


Capacity

Production

Imports

Exports

Consumption

2224

1525

22

532

1015

2236

1536

12

541

1007

2241

1515

21

628

907

2220

1555

20

628

947

1930

1495

15

670

840

1760

1275

15

597

693

1715

1085

12

567

530

1831

1231

12

550

692


Capacity

Production

Imports

Exports

Consumption

1079

932

24

671

284

1117

835

13

587

260

1093

888

17

678

227

1023

874

17

680

211

1014

841

14

660

195

906

705

12

567

151

900

640

9

494

155

906

535

6

385

156


Capacity

Production

Imports

Exports

Consumption

161

139

16

76

80

145

126

11

53

84

145

114

10

103

21

145

120

9

95

34

145

134

9

82

61

145

115

13

68

60

150

132

14

114

33

161

136

15

91

61


184

Exhibit 2.A.18: Demand supply indicators for Indonesia (million kg)

Fibre Parameter 2000 2001 2002 2003 2004 2005 2006 2007


Capacity

Production

Imports

Exports

Consumption

113

1

112

134

0

134

104

0

104

82

0

82

88

0

88

72

0

71

59

0

59

64

0

64

Nylon Capacity

Production

Imports

Exports

Consumption

122

59

16

34

40

122

106

16

42

80

128

55

15

50

20

78

86

11

42

55

68

53

10

45

18

68

64

11

37

38

68

76

16

35

57

68

75

7

36

46


Capacity

Production

Imports

Exports

Consumption

1020

730

14

303

441

878

645

12

281

376

878

650

14

300

364

928

626

14

231

409

928

620

39

239

420

928

641

37

287

391

844

616

59

289

386

766

678

15

257

436


Capacity

Production

Imports

Exports

Consumption

675

421

64

45

440

649

440

46

57

429

649

428

32

94

366

674

432

27

62

398

674

391

71

42

421

555

411

44

60

395

569

416

21

77

360

569

512

33

75

470


Capacity

Production

Imports

Exports

Consumption

285

207

23

51

179

215

205

14

37

182

220

214

19

67

166

250

223

11

35

199

260

234

6

62

178

260

245

4

83

166

310

280

27

91

216

347

325

53

94

284


185

Exhibit 2.A.19: Demand supply indicators for Malaysia (million kg)

Fibre Parameter 2000 2001 2002 2003 2004 2005 2006 2007


Capacity

Production

Exports

Imports

Consumption

18

18

17

17

17

17

18

18

18

18

8

8

16

16

19

19

Nylon Capacity

Production

Imports

Exports

Consumption

91

25

8

10

24

91

23

4

7

20

91

20

4

9

15

37

20

3

9

15

37

20

6

21

5

37

24

5

24

4

37

20

6

20

6

37

20

5

15

10


Capacity

Production

Imports

Exports

Consumption

237

180

11

250

‐59

320

171

10

203

‐22

320

150

12

260

‐98

320

243

10

279

‐26

320

230

11

284

‐43

320

255

10

324

‐59

320

257

9

309

‐43

320

262

14

233

44


Capacity

Production

Imports

Exports

Consumption

170

109

23

52

80

61

111

15

47

79

61

91

10

51

50

120

109

14

54

69

120

103

21

53

71

115

94

28

58

64

97

70

33

65

38

115

113

23

52

84


Exhibit 2.A.20: Demand supply indicators for South Korea (million kg)

Fibre Parameter 2000 2001 2002 2003 2004 2005 2006 2007


Capacity

Production

Exports

Imports

Consumption

150

106

100

13

31

150

126

68

26

34

150

130

103

14

47

150

135

104

12

42

150

153

113

7

43

158

138

86

8

17

158

155

38

7

16

158

140

42

4

14

Nylon Capacity

Production

Exports

Imports

Consumption

358

297

58

31

270

358

238

43

23

218

224

246

53

26

219

244

241

65

21

197

222

214

60

23

176

221

175

59

23

139

219

156

63

25

118

216

145

65

22

102

186

Exhibit 2.A.20: Demand supply indicators for South Korea (million kg)

Fibre Parameter 2000 2001 2002 2003 2004 2005 2006 2007


Capacity

Production

Exports

Imports

Consumption

1681

1479

358

95

1216

1701

1355

334

63

1085

1654

1318

358

69

1029

1541

1275

434

46

887

1338

1205

353

68

920

1138

857

275

79

661

925

737

234

109

611

709

216

127

620


Capacity

Production

Exports

Imports

Consumption

830

731

533

3

201

837

673

503

5

174

699

601

430

5

176

700

601

447

3

157

608

562

432

2

132

608

523

417

3

108

585

506

418

3

91

536

439

4

101


Capacity

Production

Exports

Imports

Consumption

6

1

35

40

6

0.4

26

32

6

0.3

26

32

7

0.3

21

28

9

0.3

18

26

8

0.3

15

23

9

0.2

14

23

9

0.1

13

22


Capacity

Production

Exports

Imports

Consumption

30

30

26

26

25

25

26

26

28

28

33

32

32

32

37

37


Exhibit 2.A.21: Demand supply indicators for Vietnam (million kg)

Fibre Parameter 2001 2002 2003 2004 2005 2006 2007


Imports

Exports

Consumption

69

9

60

80

6

73

80

3

77

89

5

84

93

13

80

101

27

73

80

27

52


Imports

Exports

Consumption

21

0

21

36

1

35

10

1

9

120

0

120

134

9

126

122

19

103

129

45

84


187

Exhibit 2.A.22: MMFs snapshot of India’s major competing countries (2007) (million kg)

Fibre Parameter Global China India USA West Europe

South Korea

Taiwan


Capacity

Production

Export

Import

Consumption

3000

2436

883

907

2460

885

822

3

281

1100

153

81

0

7

88

2

54

54

507

423

273

46

196

58

51

42

4

13

165

157

109

2

50

Nylon Capacity

Production

Export

Import

Consumption

3856

3848

1373

1388

3856

937

862

113

237

1,121

30

27

8

11

31

1,262

940

96

154

1103

552

424

382

437

472

216

184

65

22

102

189

570

211

28

227


Capacity

Production

Export

Import

Consumption

23874

19082

2918

2719

18903

15343

12177

633

253

12901

1973

1408

220

91

1663

464

379

72

152

459

547

403

301

589

721

709

216

127

1005

1831

1231

550

12

1029


Capacity

Production

Export

Import

Consumption

16840

12677

2433

2457

12859

9708

7000

418

201

6,783

1078

868

138

16

746

934

782

121

393

1,054

383

335

187

733

881

536

439

4

101

906

535

385

6

156


Capacity

Production

Export

Import

Consumption

650

465

174

194

485

300

227

88

13

152

82

65

23

3

44

25

25

1

5

29

85

71

18

70

123

9

0.1

13

22


Capacity

Production

Export

Import

Consumption

3080

2461

481

752

2732

1650

1140

119

39

1060

252

277

25

6

258

2

84

90

420

380

56

178

502

0

37

37

161

136

91

15

61


188

Exhibit 2.A.23: Demand – supply indicators of Viscose Staple Fibre (India) (million kg)

Parameter

Production Import Export Consumption

FY99 178.2 2.3 0.9 182.0

FY00 202.0 1.0 1.6 205.0

FY01 236.2 1.2 2.4 221.0

FY02 185.3 1.7 1.5 191.0

FY03 224.6 2.7 5.9 225.0

FY04 221.0 2.7 9.8 221.0

FY05 248.0 1.0 7.5 225.0

FY06 229.0 1.0 15.4 228.1

FY07 246.8 6.5 19.6 237.1

FY08 279.9 7.0 26.42 250.4

FY09P 232.8 10.98 28.4 222.8

CAGR (FY99-FY05) 5.7 -13.0 42.4 3.6

CAGR (FY06-FY09) 0.5 122.3 22.6 -0.8


Exhibit 2.A.24: Demand – supply indicators of Acrylic Staple Fibre (India) (million kg)

Parameter


FY99 78.9 31.3 0.4 105.0

FY00 79.3 14.4 0.7 99.0

FY01 99.4 14.1 0.5 104.0

FY02 94.8 9.7 0.3 114.0

FY03 105.3 21.7 5.2 115.0

FY04 117.0 12.8 13.8 119.0

FY05 127.6 14.2 14.0 126.0

189

Exhibit 2.A.24: Demand – supply indicators of Acrylic Staple Fibre (India) (million kg)

Parameter


FY06 107.8 11.8 5.2 111.9

FY07 97.1 11.7 2.7 107.4

FY08 81.2 7.4 1.0 94.7

FY09P 79.5 10.61 1.6 90.5

CAGR (FY99-FY05) 8.3 -12.3 80.9 3.1

CAGR (FY06-FY09) -9.7 -3.5 -32.5 -6.8


Exhibit 2.A.25: Demand – supply indicators of Polyester Staple Fibre (India) (million kg)

Parameter


FY99 522.7 17.4 16.6 494.0

FY00 551.5 13.8 51.1 534.0

FY01 566.4 21.3 29.2 562.0

FY02 551.4 27.0 17.9 556.0

FY03 582.1 25.8 29.3 572.0

FY04 612.6 12.1 31.8 596.0

FY05 644.2 15.4 50.1 623.0

FY06 628.2 15.8 42.6 610.9

FY07 792.0 14.2 124.2 675.4

FY08 879.6 16.1 145.8 739.1

FY09P 751.6 16.5 136.37 650.7

CAGR (FY99-FY05) 3.5 -2.0 20.2 3.9

CAGR (FY06-FY09) 6.2 1.5 47.4 2.1


190

Exhibit 2.A.26: Demand – supply indicators of Polypropylene Staple Fibre (India) (million kg)

Parameter


FY99 1.9 0.1 0.2 2.0

FY00 2.1 0.2 0.3 2.0

FY01 2.3 0.3 0.4 2.0

FY02 2.4 0.5 0.6 2.0

FY03 2.5 1.0 0.5 3.0

FY04 2.7 0.1 0.4 3.0

FY05 2.9 0.6 0.4 3.1

FY06 3.1 0.2 0.4 2.9

FY07 3.5 0.3 0.6 3.3

FY08 3.4 0.3 1.0 2.8

FY09P 3.4 0.16 0.85 2.6

CAGR (FY99-FY05) 7.3 34.8 12.2 7.6

CAGR (FY06-FY09) 3.1 -7.2 28.6 -3.6


Exhibit 2.A.27: Demand – supply indicators of Viscose Filament Yarn (India) (million kg)

Parameter


FY99 60.9 1.0 5.2 51.0

FY00 49.5 0.8 8.4 45.0

FY01 55.3 0.5 11.1 47.0

FY02 48.4 1.6 8.4 45.0

FY03 50.8 6.8 10.5 45.0

FY04 53.2 3.4 3.9 50.0

FY05 53.6 2.9 7.7 50.6

191

Exhibit 2.A.27: Demand – supply indicators of Viscose Filament Yarn (India) (million kg)

Parameter


FY06 53.1 2.5 9.9 47.7

FY07 54.0 2.0 11.9 42.4

FY08 51.1 2.8 14.6 41.8

FY09P 42.4 5.21 4.2 43.6

CAGR (FY99-FY05) -2.1 19.4 6.8 -0.1

CAGR (FY06-FY09) -7.2 27.7 -24.9 -2.9


Exhibit 2.A.28: Demand – supply indicators of Polyester Filament Yarn (India) (million kg)

Parameter


FY99 745.4 28.7 36.7 727.0

FY00 801.0 75.3 49.2 809.0

FY01 819.7 57.6 92.1 789.0

FY02 866.2 81.0 66.8 877.0

FY03 995.4 110.8 91.2 993.0

FY04 1013.0 93.8 70.7 1052.0

FY05 1003.6 114.7 95.7 1041.1

FY06 1075.8 92.7 105.7 1073.0

FY07 1270.9 91.3 175.4 1161.6

FY08 1420.1 85.8 228.6 1280.7

FY09P 1330.3 70.0 81.5 1336.1

CAGR (FY99-FY05) 5.1 26.0 17.3 6.2

CAGR (FY06-FY09) 7.3 -9.0 -8.3 7.6


192

Exhibit 2.A.29: Demand – supply indicators of Nylon Filament Yarn (India) (million kg)

Parameter


FY99 28.6 1.3 1.6 28.0

FY00 26.1 3.0 1.5 28.0

FY01 26.3 3.6 3.8 25.0

FY02 27.8 3.7 3.3 29.0

FY03 29.7 3.4 5.0 28.0

FY04 31.0 7.9 12.2 27.0

FY05 35.4 14.9 7.0 43.2

FY06 36.8 11.2 5.0 42.6

FY07 32.3 9.2 1.8 38.3

FY08 27.6 2.6 2.4 28.7

FY09P 28.1 3.5 2.4 30.3

CAGR (FY99-FY05) 3.6 50.2 27.9 7.5

CAGR (FY06-FY09) -8.7 -32.5 -21.8 -10.7


193

Exhibit 2.A.30: Demand – supply indicators of Polypropylene Filament Yarn (India) (million kg)

Parameter

Production* Import Export Consumption*

FY01 36.6 0.6 2.2 35.0

FY02 40.8 0.7 1.5 40.0

FY03 42.2 1.5 2.7 41.0

FY04 41.2 5.1 2.3 44.0

FY05 38.1 5.9 1.0 43.0

FY06 34.2 5.7 0.9 39.0

FY07 39.0 3.2 1.2 41.0

FY08 36.6 2.5 1.1 38.0

FY09P 34.0 1.7 0.7 35.0

CAGR (FY01-FY05)% 1.0 77.8 -18.0 5.3

CAGR (FY06-FY09)% -0.2 -33.0 -9.8 -3.5

Source: Office of Textiles Commissioner, Industry*

194

2.A.8. CONSTITUTION OF SUB-GROUP ON MAN-MADE FIBRES

S. No Name Designation

1. Shri A. B. Joshi, Textile Commissioner Convener

2. Shri A. N. Jariwala, Chairman, Federation of Indian Art Silk Weaving Industry (FIASWI)

Co-Convener

3. Shri S. C. Kapur, Director General, Association of Synthetic Fibre Industry (ASFI),

Co – Convener

4. Smt Neel Kamal Darbari, Joint Secretary, Department of Chemicals & Petrochemicals, Ministry of Chemicals & Fertilizers

Member

5. Shri R. L. Toshniwal, CMD, Banswara Syntex Ltd. Member

6. Com. M. P. Joseph, Secretary General, Association of Man-Made Fibre Industry of India (AMFI),

Member

7. Shri Vijay Kaul, Group Executive President, Grasim Industries Ltd.,

Member

8. Dr. Anup K. Rakshit, Vice-President – PSF/PFF Product Development, Reliance Industries Ltd.,

Member

9. Shri V. Kannan, General Manager, Business Development, Reliance Industries Ltd.

Member

10. Shri S. P. Oswal, Chairman, Vardhaman Group, Member

11. Shri. D. Pulikeshi, Associate Vice President (Strategic Planning), SRF Ltd.

Member

12. Shri S. V. Raut, Vice-President, Nylon and Synthetic Fibre Division, Garware Wall Ropes Ltd.

Member

13. Shri Suresh Kotak, Chairman, Kotak & Company Member

14. Shri V. K. Ladia, President, Indian Spinners Association Member

15. Shri Sanjeev Saran, Synthetic and Rayon Export Promotion Council

Member

16. Shri Shishir Jaipuria, Chairman, Confederation of Indian Textile Industry

Member

17. Dr. C. S. Gokhale, Chairman, Global Artha, Mumbai Member

18. Shri D. K. Nair, Secretary General, Confederation of Indian Textile Industry

Member

195

S. No Name Designation

19. Shri V. Y. Tamhane, Secretary General, Indian Spinners Association

Member

20. Shri R. D. Udeshi, President, Polyester Chain, Reliance Industries Ltd.

Member

21. Shri Madhusudan Bhageria, Managing Director, Filatex India Ltd.

Member

22. Shri Sanjay Thukral, Joint President, Century ENKA Ltd. Member

23. Smt. Shashi Singh, Joint Textile Commissioner, Office of the Textile Commissioner

Member

section ii: man made fibres -...

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