With its back to the wall, the industry is making desperate attempts to keep up production and push up sales in the domestic as well as overseas markets. How long it can continue doing so is anybody's guess.

This desperation explains why despite the closure of a few units and production cut-backs by others, actual output of blended yarn by the industry as a whole has recorded some improvement in recent months.

It stood around 51 million kg in April last. After declining to about 49 million kg in June, it again improved to about 52.32 million kg in August 1998. The unsold stocks, during the period has come down from 28.47 million kg in April last, to 26.90 million kg in August 1998, as most of the manufacturersare trying to push up sales by cutting down prices and ignoring profitability.

According to the industry's calculations, it can not function economically, unless it as enabled to realise conversion charges of Rs 30-35 per kg. The present ex-mill price for PV 30s yarn may be around Rs 70 per kg or lower, but the raw material cost alone may come to about Rs 50 per kg or more. Thus what is realised by the industry for conversion charges is far lower than what it considers reasonable for profitable working.

When asked why the industry does not suitably revise its prices upward, sources explain that blended yarn is facing increasing competition from filament yarn industry. Successive reductions in the excise duty on that yarn has enabled it to encroach upon the field of blended yarns. Although the incidence of present excise levy on POY at 34.5 per cent may look higher than 20.7 per cent on blended yarn, the burden on blended yarn works out much higher,since filament yarn (POY can give about 14 metres offabrics per kg, whereas blended yarn can give about 8 metres per kg. Though blended fabrics are more suitable for tropical countries like India, they suffer from the disadvantage of the higher excise burden. The incidence of excise levy on cotton yarn is just 5.75 per cent.

Export markets are far from encouraging. South East Asian countries like Thailand and Indonesia are suffering stiff competition to Indian polyester-viscose blended yarn in particular whose exports in volume terms could be increased only by slashing prices.

This is evident from the fact that while during the period from April to November, 1998 shipments of such blended yarn improved by 19.71 per cent to nearly 19,740 tonnes from 16,490 tonnes in value terms they were down by 4.80 per cent at US $44.43 million compared with US $46.46 million in the same period of the earlier year.

Only in the case of polyester-cotton blends, India is able to perform better, as Indonesia and Thailand are unable to compete in this field as they have todepend on imports of cotton.

This can be seen from the fact that exports of polyester-cotton depend on imports of cotton. This can be seen from the fact that exports of polyester-cotton blended yarn during the period April-November 1998 were higher by 50.81 per cent at 18,711 tonnes compared with 12,408 tonnes in the same period of the previous year. However while in quantity terms shipments went up by 50.81 per cent, in value terms they could rise by only 22 per cent to US$40.82 million from US$33.46 million in the same period a year earlier, showing the impact of the subdued global demand and competition from other suppliers. There are as yet no signs of any improvement in the overseas markets.

The industry contends that the incidence of basic excise duty on blended yarn should be slashed in two phases to 13 per cent and five per cent respectively. It is also pleading for the scrapping of additional customs duty of 4 per cent, reduction in the import duty on PSF and VSF from 25 per cent to 20 per centand an increase in the duty draw back on exports of blended and synthetic garments by atleast six per cent over the level for cotton garments as well as for further liberalisation of the DEPB scheme. Unless the government responds favourably to these suggestions, the blended yarn industry can be in for a deeper crisis.