The Indian textile industry continues to grapple with differences between domestic and international prices for Polyester Staple Fibre (PSF) and Viscose Staple Fibre (VSF). Data compiled by the Confederation of Indian Textile Industry (CITI) for November 2024 reveals, domestic prices for both PSF and VSF remain significantly higher compared to international rates, posing challenges for the MSME sector. This disparity could have implications for the cost competitiveness of Indian yarn manufacturers compared to their international counterparts, particularly those in China.

Highlights of CITI data

The November statistics compiled by CITI shows domestic prices for both PSF and VSF remained consistently higher than international prices throughout all four weeks of the month. The price difference was more pronounced for PSF than VSF. For PSF, domestic prices were roughly 30-35 per cent higher than international prices. For VSF, the difference was around 11-13 per cent. This price gap could put Indian yarn manufacturers at a disadvantage when competing with manufacturers in countries like China, where raw material costs are lower. This disparity also indicates challenges for Indian MSME spinners, who depend on competitive input costs to remain viable against global manufacturers.

Table: Weekly price difference of PSF and VSF in November

Domestic PSF price consistently recorded a higher percentage difference compared to VSF. By the 4th week, the price gap for PSF reached almost 35 per cent, its highest during the month. Rising cost disparity could pressure Indian manufacturers reliant on synthetic fibers. The $/Rs exchange rate remained relatively stable, fluctuating marginally between 84.21 and 84.41. However, this limited movement in exchange rates did not significantly impact the domestic-to-international price gap.

Implications for the Indian industry

Competitiveness: Higher domestic prices for PSF and VSF could erode the competitiveness of Indian yarn and fabric exports, particularly in cost-sensitive markets.

Raw material sourcing: With international prices significantly lower, import-driven procurement might become attractive, but it could incur additional costs, such as import duties and transportation.

Policy intervention: To ensure a level playing field for MSMEs, the government may need to evaluate domestic taxation and pricing mechanisms.

The growing price difference between domestic and international markets for PSF and VSF highlights a pressing need for strategic interventions. As the Indian textile sector aims to strengthen its position globally, addressing input cost inefficiencies will be crucial.