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G. Gurumurthy

COIMBATORE, Sept. 14

THE deferment of time granted recently by the Textile Commissioner (TC) for fulfilling the shortfall in the compulsory hank yarn packing obligation (HYPO) to defaulting textile units appears to have had little impact on the premiums sought for book-transfer of HYPO by producers with surplus hank yarn.

The premium rates quoted in the market for surplus hank yarn transfers still remain in the Rs 2.50-3 per kg range, almost at the same level that prevailed two weeks ago, according to industry sources.

This is despite the Textile Commissioner's office allowing extension in the cut-off date for the compliance with the HYPO for the last quarter (i.e., April-June 2002) after a plea was made by the industry seeking relief in view of the soaring premium rates.

One reason attributed for this is that the demand for transfer of surplus hank by the units having deficit hank yarn packing will continue to stick out in the coming months too as the deferment of time granted is only for one quarter.

The mills, which faced shortfall in hank yarn production to fulfil their obligation for the past quarter, have to make good the deficit along with their obligation due for the current quarter as well - the July-September 2002 quarter.

This will add further heat to the hank yarn market, particularly in the light of the sharp decline registered since March this year in the share of hank yarn in the total yarn production in the predominantly cotton yarn producing southern region. According to Textile Ministry's hank yarn production/packing data (compiled by the regional office of the Textile Commissioner, Coimbatore), the total actual hank yarn packing reported by the mills in the southern region during the October-December 2001 quarter stood much higher at 8.16 crore kg as against the actual obligation of 7.36 crore kg only, giving a total surplus hank yarn production of 79,54,526 kg.

The number of units accounting for surplus hank production then were also higher at 630, whereas the mills facing deficit hank yarn production were only 477.

However, the scene had drastically changed during the just concluded April-June 2002 quarter when the mills in the southern region could pack only 6.62 crore kg as against their HYPO of 6.79 crore kg, leaving a shortfall in production of 17,61,150 kg.

Further, the number of mills with deficit hank production during the quarter stood far higher at 634 mills (compared to the 421) textile units which produced surplus hank yarn for the same period. This is apart from the units which failed to produce any hank yarn at all.

The declining trend in total hank yarn production, according to industry and officials sources, could be directly linked to the Government bringing for the first time hank yarn into the excise duty net in the last Budget. This is said to have greatly prevented the misdeclaration of cone yarn as hank yarn by a section of the yarn producers.

The false declaration was resorted to by them in order to enjoy the excise duty exemption conferred on hank yarn and with this benefit gone, mills are now assumed to be producing only what the market wants.

Some mills earlier opted for hank yarn manufacture to gain the excise duty exemption by getting a portion of cone yarn converted into hank form by outside-reeling units. But the average expenditure of up to Rs 5 per kg they expended on such job-works became unremunerative with the Government removing the excise duty exemption. Now, these units have been forced to suspend hank yarn production.

With both the industry and the Textile Ministry increasingly veering round to the view that the production of the varieties of yarn by the individual manufacturers should be left to the market forces, the need to have a fresh look at the viability of the operation of the compulsory HYPO scheme is mounting on the Government.

This figured in the recent meeting convened by the Textile Commissioner where the textile industry strongly pleaded for a long-term measure to do away with the HYPO scheme itself.

As an interim arrangement, it had suggested a package to contain the rising premia for HYPO transfers. It appears the Textile Ministry would be goaded to accept the industry's suggestion to levy a fixed cess acceptable to all, in lieu of the premia for fulfilling the shortfall in HYPO, from the mills unable to comply with the HYPO.

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