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VFY imports not a major menace, claims industry

Reena Mital - Mumbai

Even as the Indian viscose filament yarn (VFY) manufacturers are crying out against imports of VFY into the country, the industry claims that the situation is not all that bad.

This is borne out by the fact that VFY prices over a period of time, have been moving northward, despite raw material prices coming down. According to industry experts, “VFY manufacturers are not in as bad a situation as they make it out to be. If they were facing competition from cheap imports, how do they explain the rising domestic prices. And this is despite the fact that raw material prices have been showing a decline, which gives them better margins.”

According to sources, VFY imports from China are being cleared by the customs at a declared rate of Rs 112-120 a kg, which is around US$ 2.60 a kg. “This is not very much lower than the international price. Moreover, the VFY industry has said nothing about this being the price of the first quality yarn, or yarn of lower quality. A lot of second and third quality yarn is also being imported into the country, which is priced lower,” state sources. According to them, India is among the largest VFY manufacturers in the world, and around 50 per cent of the production accounts for lower qualities - be it second, third or fourth. The prices of these are lower than the first quality yarn price.

The industry has also challenged the VFY import figures given out by the Association of Manmade Fibre Industry of India (AMFII), the representative body of the viscose industry. “AMFII has stated that imports during 2002-03 stood at 12,000 metric tonnes. As per figures available, VFY imports from April-September 2002 stood at 3089.39 metric tonnes. Have exports during the remaining six months increased by an additional 9,000 metric tonnes,” they wonder.

Experts have further pointed out that price of VFY (120 denier bright, the most used denier) has been increasing during the year. “Average price of VFY in April 2002 stood at Rs 218.60 per kg, which went up to 277.80 per kg in December, and went down slightly to Rs 267 per kg in January 2003. The price today is around Rs 240 per kg, still higher than the price in April 2002.

If the Indian VFY industry was facing stiff competition due to underinvoiced imports, it could not have been increasing its own price to this extent,” they observe.

Sources point out that the price increase in VFY has come not only in the face of competition, but also despite a fall in the raw material price. “The price of rayon grade wool pulp stood at Rs 28200 per tonne in September 2001, which went down to Rs 26500 in October 2001, and remained at this level till June 2002, and from July to September 2002, the price of wood pulp went down further to Rs 26000 a tonne. This means that the industry had scope to reduce prices,” sources aver.

Neither is the industry impressed with the argument that VFY manufacturers are saddled with stocks. “The powerloom industry was at a complete standstill during April and May, on account of its agitation against CENVAT. All yarn manufacturers had huge stock pile-ups during this period,” they point out. “Moreover, this industry is not dependent only on the domestic market, but has also been exporting, and the trend in exports has been quite good,” they add. Exports of VFY fabrics has also witnessed a steady rise - from 455 metres in 1999-2000, to 1912 metres in 2000-01, to 1539 metres in 2001-02,” they say.

According to experts, “The VFY industry talks about shut down of a number of companies in this sector, but all these closures have happened quite some time ago. There have been no recent closures, and even as the condition of some companies is not too good, the others are performing well.”