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Run-up to the Budget: Telecom Cables Industry

Telecom cables: State of the industry (2000-01)

  • During the 2000-01 to 20002-03 period, demand for optical fibre cables (OFC) is expected to increase at a CAGR of around 40 per cent. Growth in the demand for OFC is expected to be high due to a significant increase in the consumption of OFC in long distance telecommunication networks by BSNL and other private operators. A few cable producers are expected to expand their OFC capacities, due to higher expected demand for OFCs.
  • In 2000-01, there was a severe shortage of optical fibre (main raw material for OFC), largely due to higher demand for telecommunication network. Shortage of optical fibre is expected to continue till April 2002. (OFC producers have entered into long-term contracts of 2 years with optical fibre suppliers.) Given the higher expected demand for OFC and shortage of optical fibre, some cable producers have proposed to integrate into the manufacture of optical fibre, in order to ensure continuous supply and increase margins.
  • In 2000-01, BSNL placed orders of around 499 lckm of JFTC, accounting for 95 per cent of the total orders placed. The total orders for OFC placed by BSNL in 2000-01 are expected to be lower as compared with those in 1999-2000, due to the cancellation of its main order (issued in January 2000). (In December 2000, BSNL invited fresh short-term tenders for OFC.)
  • In 2000-01, average gross realisations of JFTC producers are expected to increase by around 3.9 per cent over those in 1999-2000. In 2000-01, prices of optical fibre increased significantly, due to a shortage in the global market and an increase in the demand for OFC. BSNL increased the average prices of OFC, due to a significant increase in the prices of optical fibre.
  • In 2000-01, operating margins of JFTC and OFC producers are expected to decline, due to an increase in the prices of raw materials, copper, optical fibre, polyethylene and polypropylene.

    Telecom cables: Industry expectations from the Union Budget (2001-02)

    • An amendment of the Central Sales Tax Act: The Telecom Cables Development Association has asked for an amendment of the Central Sales Tax Act, in order to enable the telecom sector to issue Form-C. This would enable cable producers to pay the concessional sales tax of 4 per cent.
    • A reduction in the customs duty: The Association has asked for a reduction in the customs duty on polyethylene, from the existing level of 35 per cent to 5 per cent; removal of the customs duty on optical fibre and preform from 15 per cent and 5 per cent respectively.
    • No reduction in the customs duty on JFTC and OFC: The Association has asked for no further reduction in the customs duty on jelly-filled telecom cables and optical fibre cables.

    Telecom cables: Prices and duties

     

    Tariffs (per cent)

    Price type

    Unit

    Domestic

     

    1999-2000

    2000-01

     

     

    prices

     

    Customs

    Excise

    Customs

    Excise

     

     

    2000-01

    Jelly-filled telecom cables

    27.5

    16.0

    26.9

    16.0

    BSNL's tender

    Rs/ckm

    733

    Optical fibre cables

    27.5

    16.0

    21.2

    16.0

    BSNL's tender

    Rs/fkm

    8,422

    ckm: core kilometers; fkm: fibre kilometers; JFTC: Jelly-filled telecom cables; OFC: Optical fibre cables

    Notes

    1. Prices of cables are weighted average prices of BSNL's tender for JFTC and OFC for 2000-01.
    2. For 2000-01, customs duty include the SACD of 4 per cent, effective since 1999-2000. In 1999-2000, the SACD was applicable only for non-traders, and hence, has not been included in the customs duty
    Compiled by CRIS INFAC

    Raw materials: Prices and duties

     

    Tariffs (per cent)

    Domestic prices

    Int. prices

     

    Landed

     

    1999-2000

    2000-01

    Price type

    Unit

    Jan 2001

    Price type

    Unit

    Jan 2001

    cost

     

    Cus.

    Ex.

    Cus.

    Ex.

     

     

     

     

     

     

    Jan 2001

    Copper

    38.5

    16.0

    44.0

    16.0

    Market

    Rs/tonne

    146,667

    LME
    cash

    $/tonne

    1,788

    148,889

    Preform

    27.5

    16.0

    9.7

    16.0

    -

    -

    n.a.

    -

    -

    n.a.

    n.a.

    Optical fibre

    27.5

    16.0

    21.2

    16.0

    Industry

    Rs/km

    4,000

    Industry

    $/km

    60

    3,871

    Polyethylene

    38.5

    24.0

    44.0

    16.0

    Market

    Rs/tonne

    49,300

    c&f FE Asia

    $/tonne

    633

    50,125

    Polypropylene

    38.5

    24.0

    44.0

    16.0

    Market

    Rs/tonne

    43,268

    c&f FE Asia

    $/tonne

    575

    45,568

    FE: Far East

    Note For 2000-01, the landed cost and customs duty include the SACD of 4 per cent, effective since 1999-2000. In 1999-2000, the SACD was applicable only for non-traders, and hence, has not been included in the customs duty.
    Compiled by CRIS INFAC


    Disclaimer: CRISIL has taken due care and caution in compiling this report. Information has been obtained by CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. CRISIL is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of its web site.

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