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Wednesday, Oct 09, 2002

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Review meet today to take up hank yarn packing obligation

G. Gurumurthy


THE office of the Textile Commissioner is to hold a review on the on-going hank yarn packing obligation (HYPO) scheme on Wednesday in Mumbai amidst speculation that some modification is likely to be effected in the scheme operation.

Though tomorrow's review meeting is described as a routine hank yarn price monitoring meetings periodically called by the Commissioner, it has triggered speculation in the textile industry on the possibility of the Central Government coming out with some modification in the HYPO scheme operation, especially in the light of a strong plea from the textile industry representative bodies to bring down the percentage of HYPO to be fulfilled by the spinners from the present 50 per cent to a `reasonably' lower level, sources in the textile industry say.

Expectations are ripe in the spinning industry that the Central Government may also find some via media to address the issue of capping the premium rates collected on transfer of HYPO by the mills producing hank yarn in excess of their own obligation from those having production short-fall to fulfilling their HYPO.

The compliance of HYPO has in recent months suffered a dent with the spinning industry expressing difficulty in fulfilling the full quantum of hank yarn packing obligation. The units, which are unable to meet the stipulated HYPO levels, were complaining that they could not fulfil the obligation due to high premium rates prevailing in the market for covering the shortfall through transfer of HYPO by the units having surplus hank production.

This has forced the spinning sector in the South early last month to represent to the Textile Commissioner seeking deferment of the time-limit for fulfilling the obligation for the outstanding April-June 2002 quarter, the cut-off date for which was August 31, 2002 . The mills were seeking this relaxation as an interim arrangement so as to bring about a sobering effect on the premium rates for book transfer of HYPO resorted to by the mills having deficit in hank yarn production. As a long-term measure, the mills have, however, urged the Textile Commissioner to devise some mechanism that will put a cap on the rate of premium chargeable for transfer of HYPO for covering the deficit in hank yarn fulfilment.

Members of the various spinning industry associations called for the emergent meeting held on September 5 last had reportedly made out a suggestion in their joint-memo to the Textile Commissioner that they were prepared to offer a `specified' rate as premium in lieu of their HYPO shortfall. This `specified' premium rate could be remitted to either the National Handloom Development Council (NHDC), the nodal agency for the handloom sector or any Government body, the Textile Ministry would recommend. These proceeds could be spent for the development of handloom sector. Following the mills representatives, the Textile Commissioner had offered to defer the deadline for fulfilling the shortfall in HYPO for the April-June quarter as one-time relaxation and had asked the mills to bridge the shortfall along with the HYPO due for the subsequent (i.e. July-September 2002) quarter. The Textile Commissioner was also reported to have sent the demands of the mills on scaling down the HYPO percentage from the present 50 per cent to a `reasonably' lower level to the Textile Ministry.

While tomorrow's meeting may take stock of the HYPO fulfilment by the mills, it is also likely that the meeting may announce some follow-up action on the hank yarn front based on the recent developments. The possibility of the Government reducing the obligation level from the current 50 per cent to a lower level is not ruled out. The organised spinning sector has been seeking the HYPO be brought down to 30 per cent or so. Considering the fact that the hank yarn obligation is linked to the handloom sector and any changes having impact on handloom sector may bear political overtones, the Textile Ministry may not accommodate the entire demands from the spinning industry, it is learnt.

The hank yarn production has declined in the last two quarters and one of the reasons attributed to the reduction in the hank yarn production is the introduction of ex-city duty on hank yarn in February last.

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