Interview of Mr. Subodh Sapra
The President, Polyester Sector of Reliance Industries Limited

Mr Subodh Sara is presently the President of the Polyester Sector of the Reliance Industries Limited. Considered to be an industry doyen, Mr. S. Sara was initially with ICI with their polyester division for more than 25 years and went to UK to work in their Petrochemicals Unit. He came back to India as the company's Executive Director. Way back in 1965 he was the one responsible to set up India's first plant manufacturing polyester. He can aptly be called as as the pioneer of polyester industry of India.

Mr. Sapra joined Reliance Industries Limited in 1985. It was through his efforts the company has made a remarkable growth in the Polyester Division of the Reliance Industries as a whole, formulating the overall strategy and management of the POY, PET , PSF, PTY and Polyester Fibrefill businesses of the company.

The Reliance Group of Industries founded by Dhirubhai H. Ambani (1932-2002) is the largest business house of India with total revenues of over Rs 99,000 crore, cash profit of Rs 12,500 crore, net profit of Rs 6,200 crore and exports of Rs 15,900 crore .

The Group is involved with various industrial sectors of India like textiles, exploration and production of oil and gas, refining and marketing, petrochemicals, financial services and insurance, telecom, power, and infocom initiatives. The company has further consolidated its position as a global leader in manmade fibres sector with its recent acquisition of Trevira GmbH. Mr. Subodh Sara speaks about the Polyester Sector of the company.

How has the budget changed the scenario for the textiles sector? And how will the change in the duty structure affect your company?

The government is slowly realizing the importance of the textile industry. Being the second largest employer and contributing substantially to the nation's exports, this industry is atleast getting the attention it deserves.

Measures like loans to processing units at international interest rates and capital subsidy, lower import duty for certain textile machinery, lower excise duty for polyester filament yarn and dereservation of knitting industry are some of the initiatives taken in the current Budget that have been welcomed by all.

Many existing textile companies, which were previously investing in non-textile actitivies, are looking at fresh investments in textile capacities business now. Moreover fund managers have put the textile sector back on their radar after many years.

With more and more investments in the pipeline, this sector requires increased supply of basic raw materials like polyester. Reliance has taken initiative once again, ahead of demand to expand polyester capacity by over half million tonnes. This capacity will be commissioned in the current financial year.

Is the textile industry ready for the post-quota regime? What is the growth potential you see in the new dispensation?

India has a rich heritage in textiles. The textile industry was closely associated with our freedom movement as well. Over regulation had retarded the growth of industry in the last few years. Now that most of the hindrances that were preventing growth of the industry have been removed, textile industry is poised for quantum change in growth. Quota removal has added another important fillip to this growth.

On a long-term basis, textile industry should grow by not less than twice the Indian GDP growth.

What do you see as the key reforms needed to make the textiles sector globally competitive?

The government has taken very positive steps to stimulate the textile industry in the last few years. There is some unfinished agenda, which I am confident the government recognizes and will deal with in the near future.

There is a major disparity in taxation, particularly excise duties between cotton and man-made fibre products. There should be a level playing field for all textile raw materials. The government should allow the consumer decide the fibre of his choice. It should not influence his choice by imposing differential duties and others forms of taxation.

Also the government should reform labour laws on a war footing. This will help especially the apparel sector to expand on the strength of temporary labour during any cyclical surge in orders.

How big a threat is China to the polyester industry?

If the government completes the unfinished agenda, I don't think China will be a threat. India would be a threat for China then.

Moreover, in terms of raw materials, China is still a major importer while India is self sufficient in raw materials. This provides ample growth opportunity for the downstream textile industry.

What are your plans for the future?

As I have stated earlier, Reliance is expanding polyester capacity by half a million tonnes. Moreover, Reliance Technology Center and Fiber Application Center are working to develop innovative products to help the down stream textile industry.

With respect to Trevira, the German company acquired by Reliance, we are in the process of integrating its operations with Reliance. We have already expanded their marketing network all over the world.

Can you just highlight some of the key figures from your last quarter results?

Polyester: Reliance is the country's largest manufacturer of PFY, PSF and PET, with a market share of 52%.

RIL's production volumes of PFY, PSF and PET increased 12% to 1,036,000 tonnes.

Reliance continued its focus on speciality products. 59% of PSF sales and 32% of PFY sales represented niche products, contributing a premium of up to 50% over commodity prices.

Demand for PFY, PSF and PET, for the year under review, was 3% higher at 1,684,000 tonnes.

Reliance also continues to be the largest manufacturer of polyester intermediates, PX, PTA and MEG, in the country, with a market share of 77%.

Production of PX, PTA and MEG increased 4% to 3,147,000 tonnes.

Won't the upward swing in crude oil prices put severe pressure on your margins?

Polyester industry is influenced by three sectors - petrochemical sector because raw material for manufacturing polyester is from petrochemical sector.

Textile sector because polyester is the raw material for the textile sector so demand is highly dependent on the growth of textile sector.

Agriculture sector, because the cotton is an agricultural output dependent on many variables.

Prices and therefore, margins of polyester are highly dependent on the performance of all these three sectors. High oil price is just one of the factors influencing polyester margins.

Similarly, low cotton prices and poor demand from textile industry will also affect polyester margins.

How do you view the current developments within the polyester fibre market?

The latest development affecting the textile industry in general and polyester industry in particular, is quota removal by the US, EU and Canada. With low cost structure and skilled manpower available within the country, India is one of the major beneficiaries of quota removal. The recent US import figures of textiles and clothing shows that imports from India have gone up by around 25% after quota removal. This is the second highest growth rate after China. Such high growth rates are expected to fuel demand for raw materials, especially polyester, in India.