The menace of Indian yarn

In spite of the anti-dumping duty on Indian cotton yarn taking effect since November of last year, the spinners are still getting battered in their home turf. Data from APTMA indicates that Indian yarn imports are still quite high and amount to virtually all of Pakistan's cotton yarn imports (over 95 percent, as of this month).

Back in the day, Indian yarn imports were relatively meager and amounted to a much lower percentage of total cotton yarn imports - 73 percent as of FY12. With time, however, India increased its share in the Pakistani market by dumping. The Indian government provides its industrialists and farmers with numerous subsidies and support, which makes their products highly competitive. In Pakistan, the conditions were ripe for dumping: a highly dis-integrated textile value chain and a high cost of doing business.

Sources in APTMA told BR Research that the reason the 10 percent RD hasn't exactly worked out, because the Indians have upped their game even more by matching the duty and dumping now at even lower prices. The total duty apparently needs to be 20 percent (15 percent RD + 5 percent customs) in order for the spinners to stay protected, an APTMA source mentioned.

The sources also mentioned that Indian cotton yarn imports are higher than the numbers indicated, owing to under-invoicing and smuggling. This would be no surprise, and to believe its true just for yarn alone would be quite naive. One source even mentioned that the cotton yarn is being mis-declared and is brought in under the guise of synthetic and/or artificial yarns to avoid the duty. However, there is little evidence to support this claim, not to mention the fact that synthetic yarn has its own duty of nine percent.

Be that as it may, the menace of Indian cotton yarn imports is indeed visible. India has not only established a major presence in Pakistan, but has also replaced it as China's largest source of cotton yarn. In any case, its unlikely that a higher duty is the answer, as it would serve as a purely cosmetic measure; the need is to restore viability to the textile industry as a whole by removing the taxes and lowering the cost of doing business.