Yarn makers demand duty reduction on polyester chips
13 Mar '06
2 min read
Small and medium polyester yarn producers have expressed their discontent over the Budget and at the Government for not bringing down the excise duty of 16 percent on polyester chips.
Polyester chips are the chief raw material used to manufacture polyester yarn today, and POY (Partially Oriented Polyester yarn has almost disappeared from the market, sources say.
Manufacturers called upon the Government to decrease the duty on chips as the duty on yarn has been reduced from 16 percent to 8 percent.
Small and Medium Scale Polyester POY Manufacturers Association explained in a letter to P Chidambaram, Finance Minister, that the 16 percent duty will increase the production costs and hence, should be lowered.
It was explained that since the value addition was only 15 percent, there was a huge amount of nonrefundable and unutilized CENVAT credit, leading to increase in cost of production.
Manufacturers had to incur extra cost of Rs4.58 per kilogram of yarn manufactured
Further, since the duty on ancillary items for the production of polyester yarn such as spin finish oil, packing material, stores and fuel is about 16 percent; all this leads to further reduction in the value addition.
The situation has ultimately led to chips based and stand alone spinners to stop clearances from their factories. Anticipating favourable response in the Budget, spinners had slowed their output then.
Weavers in Surat were supposed to be jubilliant over the budget, but their expectations were partly misplaced, and are now awaiting ofr Government to act in their favour.
Other centres like Bhiwandi, Ichalkaranji and Malegaon have been susceptible to power shortages already, but are in a quandary to turn to cotton and other blended yarns, fully.
All eyes rest on the Government, which has already chalked up ambitious plans to achieve $50 billion in exports by 2010 apart from the sector turning out to be a major bread earner for millions.
marketing@alchempro.com
