The Department of Revenue notified a stiff anti dumping duty of 48.6 cents per kilo (Rs 21.87 per kilo) on POY (partially oriented polyester yarn) imports from China on 2 August. Our calculations show that this works out to 45.4 percent on the average of CIF price of imports from China in the April-Dec 2005 data released by the DGCIS. Simultaneously, Reliance, the major producer raised its polyester price by another Rs 10 per kg to Rs 120 per kg to pull in the margins of the users on account of the low price competition from China. The Indian domestic prices are now one of the highest in the world inspite of the modest import duty of 10 percent and eight percent excise duty. Thus the current price in China in the range of $1.50 per kg is very low compared with the reliance price of $ 2.67 per kg.

The anti dumping regime on POY now covers the full spectrum of major producers starting from the market leader China, which accounts for more than half of world polyester production, the second rank of Malaysia and Thailand and the third ranks comprising of Indonesia, Taiwan, Korea and Turkey. The US and Europe which were the majors in the early 1990s are now down to very low positions in the range of 20th position following the restructuring of the world textile industry. The fort is now complete with the completion of the circle in the form of addition of China to the list of countries.

The stiff duty of 45.4 percent is based on provisional investigation in which the normal value, the key element in determining the crucial dumping margin which is the difference between the export price and the normal value charged to consumers in the home market, was based on Indian prices. Even the prices in the surrogate country, Taiwan, which too is under the anti dumping net, were not available to the investigators. None of the seven Chinese producers who were asked by the Indian authority to respond to the dumping charge by way of a formal questionnaire bothered to respond. Thus the investigators could construct a good normal value on the basis of BIA (Best Information Available) in Indian conditions. A dumping margin of 38 percent of the net export price was found.

The second part of the investigation went into the injury investigation. They found that most of the injury parameters like profits, employment, growth were fairly healthy. The only parameter which looked like an injury was that the industry could not get a good price growth due to competition from China. It was said that the Chinese took away all the growth and hence led to an impairment of what could have come in had the Chinese not exported low cost goods. Of course, the market leader Reliance was not a party to the petition for protection and only supported the application from outside in the manner of the CPI(M) and UPA relationship. Thus the injury parameters of the applicants seem to have benefited the leader who is now claims to be the number one in the polyester world with capacity over one mn tonnes after major acquisitions in Europe.

Future trends: China is a low cost producer in the world thanks to its fuel prices which are half those in India. It is now dominating the world in polyester and will grab the market altogether if the downstream users of polyester ranging from the small texturisers to the powerlooms and the garment fabricators are weakened by high prices. Pakistan has already realized the folly of false protection and brought the anti dumping duty on PFY down to less than five percent. The US is making a move to curb PSF dumping by China by resorting to a cash deposit in anticipation of a possible finding in 2007 against Chinese dumping of PSF.

The interesting point here is that the jump in POY to Rs 120 per kg from Rs 72.80 a year ago in July 2005 gives a push to cotton whose prices are in the dumps at just Rs 20 per kg with farmers in Vidarbha claiming suicide deaths to the Prime Minister. High costs and risks go into growing cotton while polyester is a continuous flow type low labour cost industry. Polyester has killed cotton and other natural fibres on account of the its inherent versatility, strength and low cost production. However, the permanent protection to polyester will open the market for the substitute cotton at least in the domestic sector. Anti dumping, apparently, protects both cotton and POY which are always at battle with each other.

There are not many players left in the polyester game in India considering the appetite of Reliance for competitors. The rising ones like Garden Silk Mills who have a capacity of more than a lakh tonnes per year on the anvil may survive a little better given the price rise due to the anti dumping protection. They will also gain from the recent reduction in excise duty on intermediates like MEG and PTA to match with the eight percent duty on POY. The huge duty credits in their CENVAT accounts will not accumulate any further. However, should the leader decide to under cut them on the strength of the anti dumping protection at a later date, the smaller players in the polyester will be eliminated in no time.

The prospects for exports are very bleak. India has not emerged as a major player in the world export of synthetic garments. It is good only in cotton segments. A large part of the reason is the high price of polyester which is a big drag on the growth of value added segments. The current duty is yet another step in the wrong direction. Fortunately, the PSF and blended yarn/spun yarn segments which are used in the weft sections of the weaving process are out of the anti dumping net after the successful defence through the High Courts against the proposed action of the commerce ministry. This action by the spinning mills has saved the textile industry to some extent.