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Dye units' growth slumps as exports turn weak

Rutam Vora  |  Ahmedabad 

Dark clouds are hovering over the in Gujarat, with overseas buyers going slow on fresh purchases. With exports generating more than 70 per cent of revenues, a sharp fall in the overseas demand has prompted dye manufacturers to halve their operational capacities.

“This is one of the toughest years the industry is facing. Demand is sluggish in the international market and cost pressure is hurting manufacturers. Most units are running at low capacity utilisation. We are currently operating at about 40-50 per cent capacity,” said Manish Kiri, managing director of Ltd, a leading dye manufacturer.

The industry in the state, having an annual turnover of Rs 10,000-12,000 crore, is preparing itself for slow growth this year. The Gujarat Dyestuff Manufacturers’ Association (GDMA) has projected growth for this year at a modest seven to eight per cent for dyes and intermediates makers.

“There are macroeconomic issues that are affecting business. Europe and the US are key markets for dyes and intermediates. Demand from Europe is dull due to overall economic conditions, while a sharp drop in consumer spending in the US has affected the demand for garments, thereby affecting dye consumption,” said R S Patel, president of the GDMA.

Gujarat is the largest producer of dyes in India, accounting for close to 80 per cent of India’s total dye production. The state also produces 65 per cent share of the country’s chemicals and intermediates.

“India is one of the largest suppliers of reactive dyes, mainly used for cotton-based dyeing. But since there is gloom in the western economies and garment demand has dipped, we see this affecting our businesses as well. Companies are operating at lower capacities for the past one and a half months now,” added Patel.

In Gujarat, there are over 1,000 dye and intermediate making units, of which some 80 per cent are small and medium enterprises (SME) with an annual turnover of about Rs 10 crore. The industry employs about 100,000 workers in the state.

“Profit margins are under pressure due to high input costs and weak earnings from overseas. Units can curtail their production but cannot reduce their overheads so suddenly. Therefore profits are under pressure,” said a dye maker in Ahmedabad.

First Published: Tue, July 24 2012. 00:42 IST