MUMBAI, June 3: Major nylon tyre cord manufacturers Century Enka, SRF and NRC will find the going tough in the ensuing months as the nylon tyre cord has been exempted from the eight per cent across-the-board duty on imports in the recent budget. The exemption will force the nylon tyre cord manufacturers to keep the present price levels intact. Their bottomlines have taken a beating over the last few months owing to cheaper imports. The prices have come down by Rs 5 per kg to Rs 170."With the exemption of nylon tyre cord from duty, the manufactureres have lost an opportunity to effect a price hike in order to make up for the losses incurred in the last two years," said a top NRC official.
SRF had bought out the massive Ceat Ltd nylon tyre cord unit two years ago in a much-publicised and expensive deal, which the Arun Bharat Ram group company was hard put to complete. The company will have a stiff battle on hands to fight the import duty situation, industry sources said.
It is believed that the tyremanufacturers, themselves reeling under recession, lobbied hard with the government to get exemption from the government on import of the vital input.
Rise in imports which began in 1995-96 had peaked to an all-time high during the first half of 1997-98, the period when the South East Asian meltdown started. Imports of nylon tyre yarn and fabric rose from an average of about 900 mt per month in 1995-96 to about 1700 mt during the first half of 1997-98, an increase of 89 per cent. The import prices have also declined by 23 per cent during the same period. Off-take from domestic suppliers has fallen from 3,800 per month last year to 3200 per month in the current year.
The alarming rise in imports has led to underutilisation of capacity in the domestic industry with major players operating only at 70-75 per cent. The situation has played havoc with the prospects of the domestic industry with most of the players reported to be facing grave financial problems. For instance, Singhanias-owned JK Synthetics hasalready closed the production and Baroda Rayon Corporation (BRC) and Nyrlon facing the prospect of closure.
Though reduction in the excise duty on nylon filament yarn may come to the rescue of BRC, 8 per cent across-the-board duty will make the import of caprolactum -- the basic raw material for nylon tyre cord -- costlier. Since caprolactum is widely imported, the additional import duty will take off the advantages accrued from the reduction in excise duty on NFY. SRF, Century Enka and NRC are the major players in the industry of which SRF is the major manufacturer with a capacity to produce 20,0000 tonnes per annum. NRC has a capacity to manufacture 7,000 tonnes per annum.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
