Yarn likely to cost more

BS Reporter / February 27, 2010, 0:05 IST

Excise duty has been increased from 8% to 10%.

The government has increased excise duty on petrochemicals in the organic chemicals category. The notification issued by the Central Board of Excise and Customs states that DMT, PTA, MEG and benzene to produce caprolactum and acrylonitrile have been raised from 8 per cent at present to 10 per cent. While caprolactum is a raw material for producing nylon yarn, other petrochemicals are raw materials for polyester yarn. Today’s government notification, which supersedes the earlier one, gives effect to these changes. It will result in an increase in the final product prices of synthetic yarns. Reliance Industries and Alok Textiles are some of the major producers of these yarns. Sunil Khandelwal, CFO, Alok Industries, said: “The final duty burden will not be much as these are modvatable, but marginal increase in duties will be passed on to the ultimate consumer”. Owing to this, yarn prices are expected to go up by 1-2 per cent or Rs 1 to Rs 1.50 a kg.

Producers manufacture fibre from these petrochemicals. And the duty on fibre too has been increased from 8 to 10 per cent, but duty paid on basic petrochemicals can be deducted from the duty on fibre, hence, overall it would not have much impact. Khandelwal believes the market will absorb these hikes since cotton yarn is more expensive and cotton prices are very high. However, Jayesh Pathak, president of the Bombay Yarn Merchant Association believes that “currently the demand for synthetic yarn is low and while producers may raise prices, the market may not be able to digest the hike.”

Source:
http://www.business-standard.com/india/news/yarn-likely-to-cost-more/386925/