A couple of factors seem to be responsible for the strong rally. In the wake of financial crisis, some East Asian countries had started cut-throat price competition, taking into account the sharp drop in the values of their currencies, decline in domestic demand and the excess capacity that had already been built up. The price war pulled down their export quotations for polyester staple as low as US $0.50-0.55 per kg. Even POY fell to US $0.55-0.60 per kg.

This fierce competition had dual impact on the Indian polyester industry. Plans to export substantial quantities of polyester to the overseas markets got derailed. After a continuing rise in overseas despatches up to March 1998, they took a down turn. Moreover, in view of problems being faced by the domestic textile industry, internal demand lacked strength. The indigenous industry had no option but to prune its prices in line with the trend in overseas markets to stem imports. This is how the price of polyester staple and partially-oriented yarn (POY) touched rock bottom levels around October 1998.

However, around March 1999, overseas producers realised the suicidal folly of indulging in reckless price-cutting which were prompted largely because of excess capacity and subdued demand. They felt that the better option might be to keep down production. They opted for it and overseas prices started moving up. This led to a surge in prices particularly after April 1999. That situation has persisted since then.

Another factor that has provided a fillip to polyester prices is the upheaval in the petro-chemicals market in the wake of global surge in crude oil prices. PTA and MEG (raw materials for the polyester industry) have surged both in the overseas and domestic markets. For instance, PTA which was available inthe domestic market Around Rs 22.5 per kg ex-factory in October 1998 has gone up to Rs 29.7 per kg., a rise of nearly 17.31 per cent. The spurt has been even more spectacular in the case of MEG which has shot up nearly 53.75 per cent toRs 36.9 per kg from Rs. 24 per kg in October 1998. It might be interesting to note that MEG price had fallen as low as Rs 21 per kg in April 1999. Compared with that the present price of Rs 36.9 per kg shows a spectacular rise of nearly 76 per cent.

In retrospect, one may find that the polyester industry as a whole had much better growth in 1998-99 compared with many other industries. The output of polyester fibre went up by 20.3 per cent during the year to nearly 5.24 lakh tonnes from 4.35 lakh tonnes, while that of filament yarn advanced by 14.2 per cent to 7.53 lakh tonnes from 6.60 lakh tonnes in the earlier year. While major producers with forward and backward integrations could do well, several small units with uneconomic capacities and without such integration find it difficult to survive. It would be no surprise if some wellknown industrial houses were forced to sell their units to more viable companies. The process of mergers and acquisitions witnessed in the last year might continue for some more time.