Struggling to cope with increasing imports, synthetic textile manufacturers bet big on rupee depreciation for a turnaround in their fortunes post the September quarter.
Data compiled by the Directorate General of Commercial Intelligence and Statistics (DGCI&S) under the Ministry of Commerce, showed a dramatic 47 per cent increase in the import of readymade garments (RMG) out of manmade fibre to $78.46 million for the period between April and July this year from $53.52 million reported in the same period last year. Import of man-made staple fibre, yarn, fabrics and made-ups, however, jumped by 26 per cent to $896.35 million for the four months period ending July 2018 compared to $591.62 million in the same period last year.
After stabilizing at around 63.9 against the dollar towards the end of calendar 2017, the rupee started sliding gradually to hit 65.2 by the end of March 2018. The Indian currency, however, slipped steeply further to trade currently at 71.8 against the greenback. So, synthetic textile manufacturers are hoping the industry to see a turnaround in coming quarters as imports of readymade garments are likely to slow on rupee depreciation.
“Rupee has seen a sharp depreciation so far this calendar year. Most of its fall was seen since April. While increasing crude oil prices have made the input of synthetic textiles costlier which we have been able to pass on to consumers so far, rupee depreciation will certainly make import price worthy and export profitable.
We see the industry to a turnaround in December quarter, if not in September quarter,” said Om Prakash Lohia, Chairman and Managing Director, Indo Rama Synthetics (India) Ltd, India’s largest polyester manufacturer.
On a turnover of Rs 3.56 billion, Indo Rama Synthetics recorded a net loss of Rs 292 million for the quarter ended June 2018 as against Rs 6.52 billion of turnover and Rs 155.7 million of net loss reported in the same period last year.
In a major relief for domestic synthetic textiles producers, the rupee has depreciated over 11 per cent so far this calendar year to trade currently at 71.8 against the dollar today from the level of 63.9 towards the end of last calendar year. A majority of this rupee fall was seen post-April.
Experts, however, believe that the export orders booked after April will start getting executed now. Hence, its impact would be seen partly in the September quarter and fully in the December quarter. Thus, India’s export of synthetic textiles is set to revive in the September quarter.
“This substantial growth in imports of man-made staple fibre (MMF) and MMF-based textiles into India needs urgent government attention with remedial and protectionist measures. The government should immediately double basic customs duty on MMF, MMF yarns such as polyester, viscose and others to 10 per cent from the existing 5 per cent; and nylon fibres and yarns to 15 per cent from the existing 7.5 per cent,” said Sri Narain Aggarwal, Chairman, The Synthetic and Rayon Textiles Export Promotion Council ( SRTEPC).
Aggarwal hoped for a better export trend in the coming quarters in synthetic textiles segment with active support from the government. However, the government needs to suitably address the current goods and services tax (GST) and other hitches such as refund of input tax credit, refund of GST/IGST on capital goods, refund of embedded taxes from the state as well as the Centre.
India’s exports of synthetic textiles and raw materials have declined in some categories while others remained flat during April – July 2018 period.