Viscose industry braves competition

By Ramnath Subbu

MUMBAI, MAY 7. The Indian viscose staple fibre (VSF) industry is going through difficult times. First, it has had to contend with environmental issues because the manufacture of VSF is a polluting process but a more real threat has been from polyester which is cheaper and readily available as a blending fibre in clothing.

The domestic VSF industry is dominated by the Aditya Birla group- owned Grasim Industries which has a 90 per cent market share and SIV Industries (formerly South India Viscose). Between the two, they have the highest global capacity.

Domestic demand has been growing at 8-9 per cent per annum over the last couple of years. Viscose is popularly known as the `poor man's silk' or `art silk'. Its properties are well suited to Indian conditions. It is often a cotton substitute and owing to its `breathing' and moisture absorption qualities, it is similar to cotton besides being cheaper. Viscose is, in fact, the only man-made textile fibre that is cellulosic.

According to Mr. Shailendra Jain, President, Grasim Industries, ``Globally, the growth in demand for VSF as a fibre is not increasing largely because of the competition from polyester and synthetic fibres which are cheaper. Domestically, the problem has been due to lack of innovative marketing. We are now attempting to highlight the value-added properties of VSF - the feel, comfort, softness, moisture absorption and hygiene factors. Also, synthetic fibres do not take on colours as well as viscose. Where they do score is durability and wash-and-wear properties.''

There has been a marked shift towards cotton from manmade fibres in developed countries. Besides, the manufacture of VSF is a polluting process and there has been a gradual shift in production facilities from the developed countries towards Asia.

The demand for VSF hinges on the vagaries of the textile industry. Blended with polyester, it competes with cotton, whose prices affect demand. If cotton prices increase, there is a steady demand growth for VSF. The relative price differentiation between polyester and viscose has a bearing on demand. High polyester prices also lead to substitution by viscose and vice versa.

The total capacity of the domestic industry at present is about 4 lakh tonnes per annum. Grasim's facilities include its Nagda facility in Madhya Pradesh with a capacity of 1.22 lakh tonnes, Mavoor, Kerala, 26,175 tonnes, Harihar in Karnataka 38,325 tonnes and Kharach in Gujarat with a capacity of 60,000 tonnes giving a total domestic capacity of 2.20 lakh tonnes annually. Besides, its facilities in Thailand and Indonesia have capacities of 67,520 tonnes and 87,600 tonnes respectively giving a total worldwide capacity for Grasim of 3.75 lakh tonnes. SIV Industries near Coimbatore in Tamil Nadu has a capacity of about 40,000 tonnes.

The entry barriers in setting up a new unit are chiefly costs and access to raw materials. It would cost between Rs. 55,000 and Rs. 65,000 a tonne of capacity to set up a new unit. Grasim is among the lowest cost producers of VSF in the world mainly due to its vertically integrated operations. It produces most of its requirements of the principal raw materials - caustic soda and rayon grade wood pulp (RGWP). RGWP constitutes about 50 per cent of the cost. Mr. Jain said, ``Our facilities require about 550- 600 tonnes of RGWP per day. While 200 tonnes is sourced from the Harihar facility, 200 tonnes is from AP Rayon facility and the remaining is met from the Atholville, Canada, facility.''

Grasim is also focussing on research and development. In fact, the Birla Research Institute (BRI) at Nagda has been active in the technological development and advancement of cellulosic products. It has successfully developed a process for the manufacture of dissolving grade pulp from bamboo, eucalyptus and other tropical mixed hard woods instead of the scarce soft woods.

The BRI has also done pioneering work in developing an eco- friendly VSF process. From the start, zinc had been an inseparable part of the VSF manufacturing process. A heavy metal, it is considered toxic and harmful to aquatic life. The thrust was to find an effective substitute for it. Some years back, the team hit upon aluminium sulphate or alum which is a non-toxic substance.

SIV Industries' entire production of RGWP is consumed captively. Its VSF plant was shut down from January 1997 till mid-1999 due to environmental problems. This was solved with the installation of an effluent treatment plant. The Tamil Nadu Pollution Control Board (TNPCB) has put a ceiling of 33,000 tonnes per annum for the VSF plant. Due to the earlier closure of the plant, the company had been suffering losses for three years and last year it had made a rights offer for about Rs. 35 crores in the ratio of one share for every equity share held. After the rights issue the equity capital has risen to Rs. 69.12 crores and reserves stood at Rs. 55.62 crores.

The company was hopeful the viscose staple fibre manufactured under the new technology would have a better market. The technology is provided by Lenzing Austria who are world leaders in this product. It is claimed the rayon quality is far superior to any other competitive indigenous product .

The company is at present managed by Mr. Pallonji Shapoorji Mistry and associates.

Send this article to Friends by E-Mail

Section  : Business
Next     : Global investors meet in Bangalore