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Dyes

 Background

The Dyestuff sector is one of the important segments of the chemicals industry in India, having forward and backward linkages with a variety of sectors like textiles, leather, paper, plastics, printing ink and foodstuffs. The dyestuff industry comprises of dyes, dye intermediates, and pigments. From being importers and distributors in the 1950’s, it has now emerged as a very strong industry and a major foreign exchange earner. India has emerged as a global supplier of dyestuff and dyes intermediates, particularly for reactive, acid and direct dyes. 

Although the industry’s contribution to the GDP is negligible (less than .05%), it derives its importance from the fact that it is an intermediate for textile, leather, paints, rubber, plastics, and printing inks industry. 

Production data for the three major dyes during financial year 2005-06 indicates a moderate growth in production:

  • Production of reactive dyes increased by over 11% (year on year) to 2,900 tonnes.
  • Production of organic pigments increased by about 1% (yoy) to 13,600 tonnes.
  • Production of azodyes declined by 4.8% (yoy) to 3,900 tonnes.

Exports of dyestuff and dye intermediates have increased significantly to about Rs. 51 billion  driven by increased exports to Indonesia, Pakistan, Singapore and Malaysia. 

Following the recovery in the textile sector, India’s dyes and dyestuff production increased by 10% during FY2005 to 28,500 tonnes, as compared with a growth of 0.5% during FY2004. However, production has increased at a 5-year compound average growth rate of 0.1% during FY2001-05. Production during the FY2006 registered a growth of about 3.5% at 29,500 tonnes.

 Size 

  • The textile industry accounts for the largest consumption of dyestuffs at nearly 80%.
  • The Indian market for dyes (including pigments) is estimated at Rs. 35 billion and has been growing at 2-3%. The textile industry accounts for the largest consumption of dyestuffs at nearly 80%. 
  • The total production of dyes and dyestuff is estimated at around 28,700 tonnes during FY2005. 
  • India has emerged as a global supplier of dyestuffs and dye intermediates, particularly for reactive, acid, vat and direct dyes. It accounts for about 6% of the world production. 
  • Organic pigments, azodyes, and reactive dyes account for around 72% of the total production of dyes and dyestuff in India.

Structural Characterstics 

  • Dyes being an intermediate to various industries such as textiles, leather, paints, rubber, plastics etc, gets affected by demand from the end user industries.  
  • Moreover, the industry is characterised by a large number of units in the unorganized segment. Of an estimated 950 units,  only 50 are in the organised sector. However, globalisation and rationalisation of duty structure, coupled with stringent environmental norms have had its impact on the small-scale sector. However, organised players are estimated to account for about 65% of total dyestuff production in the country.  
  • Presence of SSIs are largely limited to the low end dyes segment while the larger players focus towards high end and complex dyes that have higher margins associated with them. The low end dyes segment may not require high investments. 
  • Though raw material for dyes are available adequately most of the time, international price movements in petrochemicals exert discernible pressure on their prices. 
  • The Indian dyes industry suffers from overcapacity. Capacity utilisation has declined from 56% in FY1999 to 48% in FY2004, and to 53% in FY2005. 

Policy 

Various policies that affect the Dyestuff industry include the rationalisation of customs duty structure as well as introduction of the effluent treatment and environmental norms. Though the industry enjoys considerable protection due to high customs tariff, there was a reduction in the peak rate of customs duty on dyes and colours (barring a few) to 12.5% in the Union Budget for 2006-07.

Outlook 

  • Overall production of dyes is expected to increase at a slow rate of around 4% during the medium term.  
  • The progressive reduction in the import duties may expose Indian companies to competition from imports from other Asian countries. 
  • Dyes and dye intermediates offer immense possibilities for exports from India in view of their international quality and competitive prices. These now emerged as a very strong industry and a major foreign exchange earner. 
  • Even as the demand for dyestuff may witness a modest growth of 4% in the medium term, the companies face significant competition that may affect sales and profit growth. However, increasing share of the high-end dyes (that have higher margins) may enable companies to maintain healthy and margins. 
  • Although a few natural dyes have retained a significant position in the textile sector owing to their unique qualities, synthetic dyes are expected to maintain their dominance in global textile industry. The food sector, however, is experiencing a trend back towards natural colourants.  

References:  http://chemicals.gov.in/, Economic Survey, ICRA reports

Annual Report 2006-07, Ministry of Chemicals & Fertilisers, Department of Chemicals & Petrochemicals
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