Ril, Indo Rama Reject Plea To Cut Psf Output

Reliance Industries and Indo Rama Synthetics have rejected the Indian Fibre Manufacturers Association (IFMA, headed by JCT joint managing director Sameer Thapar) proposal to cut down their polyester synthetic fibre (PSF) production by 20 percent in order to check sliding domestic prices of the commodity.

The two petrochem giants were invited to join the association as part of an overall effort by the polyester staple fibre manufacturers to check the rapidly declining PSF prices in the domestic market.

It is extremely irrational to expect that we shall cut down on our PSF production in order to improve the situation of other manufacturers. Would these PSF manufacturers done the same thing and operate at lesser capacities than is optimum for them if the situation had been the reverse in order to save us,? asks O P Lohia, maanging director, Indo Rama Synthetics. Reliance Industries, however, refrained to comment on this issue.

 

Sameer Thapar had pointed out that these two petrochem majors, by catering to almost the entire market, has forced the reduction in PSF prices. This has made the operations of other manufacturers like JCT and JK Synthetics unviable.

How can anyone suggest that we should cut down our production and lose out in the market so that they can save themselves? This is very absurd reasoning and certainly not acceptable to us, Lohia said.

Voicing similar arguments, an industry source had pointed out: In a free market economy, it is highly illogical to expect some players in the market to subsidise the inefficiency of other producers by cutting down on their own production.

The very demand that Reliance Industries and Indo Rama Synthetics should

cut down their PSF production by 20 percent in order to ensure that other polyester staple fibre manufacturers have a say in the price structure is

irrational.

Sameer Thapar had earlier told Business Standard that Reliance Industries and Indo Rama Synthetics produce about 33,000 tonnes of PSF annually out of the total domestic production of 45,000 tonnes.

However, the countrys demand for PSF stands at 32,000 tonnes per annum, indicating massive overcapacity in the PSF market.

The differential between demand and supply in PSF being substantial with supply surpassing demand by a huge margin, smaller producers have lost their influence on the price of PSF.

Morover, undercutting of price by Reliance and Indo Rama had adversely affected the profit margins of the smaller manufacturers and reduced it to negligible proportions.