Dyeing's Patalganga plant to make PSF

Bombay Dyeing has suspended chemical manufacturing at its Patalganga unit, where it plans to produce polyester staple fibre (PSF).

The plant, which produces di-methyl terephthalate (DMT), is being modified to produce 165,000 tonne of polyester stable fibre (PSF) per annum.

The new project will go on stream in the third quarter of 2006. The DMT division contributed 64 per cent to the textile company's revenues of Rs 1,100 crore in the financial year ended March 2005. But sources said it anticipated "limited opportunity" for the input. DMT is used for polyester production.

Earlier reports had stated that the company will invest Rs 350 crore to set up the modified PSF unit. Financed through internal accruals and borrowing, the investment will have the company looking for forward integration and concentrate on captive use of DMT.

The DMT production is said to be a cyclical business and its "limited opportunity" has led to the company taking the decision. With forward integration, the company's margins are expected to improve. DMT, along with purified terephthalic acid (PTA) are used in the production of polyester fibres and resins.

Incidentally, the recent Union Budget announcement had reduced import duty on raw materials such as DMT, PTA and MEG from 15 per cent to 10 per cent and that of paraxylene to 2 per cent.

The excise duty has been reduced on all man-made fibre yarn and filament yarn from 16 per cent to 8 per cent and the move will help the company. Moreover, import duty on all man-made fibres and yarns were also reduced from 15 per cent to 10 per cent.

Polyester consumption in India is still to catch up with global level. Here cotton consumption is about 70 per cent and polyester and blends make up the remainder. Nevertheless in the last few years, polyester consumption has grown by at least 20 per cent.

Reliance Industries dominates the polyester market. Polyester is also becoming a fibre of choice among manufacturers.