Textile industry wants skewed dumping duty on VSF to go

Anti- dumping duty on viscose staple fibre ( VSF) has hurt the textile industry badly while it benefited monopoly players. The industry now wants the government to end the dumping duty, which is forcing textile units to import spun yarn. It is estimated that the power loom sector lost the opportunity to utilise production capacity worth Rs 1,000 crore and provide 8,000 jobs in FY20 due to higher imports.

Viscose yarn producers and the downstream sectors are troubled by the discriminatory pricing of the dominant domestic staple fibre producer on the back of the anti- dumping duty on imported fibre. This has resulted in India's viscose- based manmade textile products lose their competitiveness in the overseas market.

For the past 10 years, VSF has been enjoying "undue protection" by way of anti- dumping duty. VSF attracts anti- dumping duty of $ 0.103 to $ 0.512 per kg of import. This has made the fibre costlier for the domestic yarn producers compared with international prices.

On the other hand, Grasim, which produces VSF in India, has been following a "discriminatory pricing" and MSME spinners have been bearing the brunt of it, says the Southern India Mills Association ( Sima).

The current capacity of the domestic producer is not enough to meet the growing demands of the industry and hence the indigenous producer is adopting import parity pricing while selling the fibre to domestic spinners at a premium of Rs 20/ kg, taking advantage of the anti- dumping duty. At the same time, Grasim is exporting the fibre to competing countries like Bangladesh, Turkey, Nepal, and Sri Lanka at international prices.

Further, the manufacturer has been adopting a complicated domestic pricing policy. It promises discounts to the tune of 40 per cent while withholding over one- third of it till the year- end, leading to the blockage of working capital. It links the discount to the incremental fibre consumption with a one- sided penalty clause and prevent sourcing from other suppliers with an annual contract, said Sima.

"Competition Commission of India in its order dated March 18, 2020, levied Grasim Industries a penalty of Rs 301.61 crore for abuse of dominant position in the market for supply of VSF to spinners in India," said Ashwin Chandran, chairman, Sima. When contacted by Financial Chronicle, Grasim spokesperson did not respond to the allegations by the power looms.

Due to the higher pricing of the fibre, the power loom sector has been increasingly importing yarn from overseas markets. The import of viscose spun yarn grew 27 times from 2,022 tonnes in 2016- 17 to 56,262 tonnes in 2019- 20.

Removing the antidumping duty on VSF will make the entire Indian VSF textile value chain globally competitive, said the Northern India Textiles Mills Association.

Both the associations want the duty to be removed on VSF.