Filatex India Ltd

Excerpts from the Chairman Letter for FY 2023

The operating profits were impacted by several factorsincluding rising input cost of power and fuels, packing materials and consumables. Throughout the year, themargins remained under acute pressure due to large quantities of yarn being imported from China. The “zerotolerance” policy of China to contain Covid dampened their domestic demand . Even after relaxation on restrictions, the demand for yarns in China failed to gather momentum. Thus, Chinese yarn manufacturers started selling materials to India, Vietnam and other countries across the globe at very low prices. Though the material offered to Indian traders and importers was a minor fraction of China’s huge capacities and didn’t do much harm to them, but it was enough to almost destroy the domestic manufacturing capacity in India. While we did not cut operating capacity, we could sell only by matching Chinese prices. This situation led to a steep erosion of our margins. Several representations were made by Indian manufacturers through various associations and industry bodies. Surprisingly, this reality is grossly overlooked. In fact, the textiles yarn segment is not the only one that suffered. Several other industry segments had to face a similar situation. The information opacity relating to price, quantity and quality of these covert imports have made any project’ risk assessment difficult and all fresh investment plans are on “hold”. It would not be out of place to say that these imports are encouraging trading and assembling business at the cost of manufacturing investment. On one hand, we have a strained relationship due to the geopolitical situation and “Atma Nirbhar Bharat” but when it comes to imports from China , the situations seem quite different . Low Chinese prices also affected our exports. Despite slowdown in growth and disruptions in world trade and strained relations with China, imports from China to India were at a record level of over $102.25 billion in FY2022.The surge in scale and range of Chinese imports, aided and abetted by unscrupulous means including connivance among exporters, importers, clearing agents and customs, has sapped the performance, vitality and innate potential of the yarn sector. An import-dependent consumption, production and trading structure has evolved despite adequate manufacturing capacity. Cheaper imports of lowgrade quality yarn and fabrics continue to harm the Indian manufacturers. The Government of India is looking at ways and means through some policy initiative to stem this rot. QCOs on filament yarns have been prepared and are under implementation.