Though silk yarn is a restricted item on the negative list which can be imported only against a duty entitlement export certificate or advance licence, the market has been flooded with Chinese silk smuggled through the porous Nepal border and the supply of this smuggled silk has become a determining factor in silk prices in the city.

Varanasi, northern India's silk city, consumes an estimated 1,800 to 2,000 kgs of silk yarn daily which is mainly used for weaving exquisite Banarasi sarees and dress material.

The price fluctuations in Varanasi rely heavily upon external sources for yarns unlike Karnataka, which is a major supplier of raw silk yarn in the country apart from being one of the major consumers as well.

The city dependsupon centres like Karnataka and to some extent Kashmir and Deharadun while most of the supplies are from countries like China, Hong Kong and Brazil. While there are over 50 types of silk yarn in the market ranging from filature yarn, made from mulberry silk which has a big demand in the Varanasi market to other varieties such as dupion, spun, noil, reel tussar yarn and ghicha yarn, it is the price of 20/22 denier Chinese mulberry silk yarn which is of most relevance to the Banarasi silk industry largely on account of its superior and uniform quality which makes it easy to use on powerlooms for the manufacture of sheer silk sarees including kora, organza, tissue, monga and kota. The Karnataka-produced mulberry silk yarn on the other hand is ideal for weaving handloom sarees because of its uneven thickness.

Speaking to The Financial Express, JP Mundra, president of the Varanasi-based Western UP Exporters Association revealed that the current price of 20/22 filature yarn hovered in the range of Rs1,150-Rs 1,200 per kg mark CIF for the legally imported silk yarn.

However, the actual selling price of this yarn works out to around Rs 1,550 per kg after including the advance licence premium which currently stands at Rs 375 and handling expenses. Mundra further disclosed that there was not much difference between the selling price of smuggled yarn and legally imported yarn. On the contrary, it is the former that causes sharp price fluctuations since a sudden surge in arrivals force the prices to fall and vice versa.

In the case of legally imported yarn, while depreciation of the rupee in the international market against the US dollar may lead to an increase in the CIF rate of yarn as an increase in rates of the yarn in the Chinese market, insiders maintain that the appreciation of the dollar is largely offset by a corresponding fall in the advance licence premium in the Indian market.

Therefore, the dollar-rupee parity vis-a-vis yarn prices in the Chinese market have far less bearing on the priceof silk yarn in the Varanasi silk market than an increase or decrease in the supply of smuggled yarn, sources claim.

While yarn prices fluctuate in the range of Rs 10 to 15 in a single day, the variation over a fortnight could be higher at around Rs 100 to 200. In addition to this, seasonal demand also causes price variations to some extent. For instance, the demand for Chinese mulberry silk yarn is maximum during summer when there is an increased demand for silks such as kora, organza and tissue. Similarly, there is an increased demand for silk yarn prior to marriage seasons which usually falls between November and January, and between March through May.

Over the past six months, prices of silk yarn touched a high of Rs 1,900 currently the price hovers around Rs 1,550 per kg. Against this, the prevailing price of domestic mulberry yarn manufactured in Karnataka hovers around Rs 1,600 to 1,800 per kg.

Market sources state that there is more demand for the imported variety not only due to lower pricesbut also because the demand for traditional pure silk sarees is rapidly declining.

Therefore, saree manufacturers are now increasingly resorting to replacing silk with viscose. Thus while the warp is silk yarn, the weft is mostly viscose. This not only reduces the weight of silk yarn considerably but also makes maintenance easier while retaining the rich silk look at the same time.