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Dyestuff industry loses colour amid slowdown

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Badly hit by the economic slowdown in the US and the EU, the export-dependent Rs 18,000 crore dyestuff (colourant) industry has truncated its growth forecast to “nil” from 20 per cent seen last year.

The industry had been growing around 20 per cent since the beginning of this decade and for the present financial year also it was expected to maintain its growth. But the economic fallout in the US and EU has seen India’s export orders dip over 50 per cent in the last four months as overseas buyers remained watchful for fresh orders.

This is significant as the labour-intensive and environment-sensitive India’s colourant industry employs over 100,000 people and contributes close to Rs 11,000 crore to the exchequer.

Overseas performance

(Rs crore)

2004-05 5,346
2005-06 7,114
2006-07 10,469
2007-08 10861
2008-09 12,500*
* forecast

Two-thirds of the dyes and intermediates produced locally is shipped abroad, mainly to the US, the EU, Far East, South East Asian countries among other parts of the world of which the US and EU together consume about 65 - 70 per cent.

“Till September 2008, the industry maintained its growth rate but after the fallout of Lehmen Brothers in the same month, orders started falling which is continuing even now,” said Janak Mehta, president of the Dyestuffs Manufacturer’s Association of India (DMAI).

Mehta admitted that the overseas demand has slumped remarkably in the last 2-3 months. It has been compensating growth we had recorded in the initial months of the present fiscal. We would be thrilled if the industry is witnessing any growth this year, he added.

Last year, India’s colourant industry exported dyes and intermediates worth Rs 10,861 crore which was estimated to grow this year to Rs 12,500 crore. But, looking at the current industry scenario, the target looks unachievable, Mehta hinted.

Obviously, the price of colourants, which differs from product-to-product has also declined by upto 20 per cent because of the lack of export demand.

Dyestuff is used in almost all sectors which requires colour other than natural ones. Textile, leather, soaps and detergents, chemicals and pharmaceuticals, food and agricultural sectors are the largest users of colourant globally.

Today, the industry meets about 95 per cent of the domestic demand and has 8 per cent globally. Though this is commendable, it is way behind China’s share of 27 per cent of global colourant industry, despite the country being a late entrant.

“Although, the domestic demand has increased slightly, with aid of the construction sector, the industry needs government support to compete with global players in the US and EU markets,” said C K Singhania, vice president of DMAI and a veteran of colourant industry.

The excise duty, currently prevailing at 10 per cent, should be brought down to “nil” in addition to a revamp in infrastructure and unnecessary delays in shipment by the Customs department, Singhania added.

Singhania pointed out that research and development, which is the backbone of the industry must be encouraged with adequate funding by the government. The spending on R & D which is very low currently has to be increased considerably in order to encourage development of new methods of synthesis.

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