The-Polyester-Prince

Pakistan in 1965, India’s external balances were under strain and the government
was ready to entertain more contrived schemes to boost export earnings.
coup was to persuade Pai in 1971 to authorise imports of polyester filament yarn
(PFY) against exports of nylon fabric. Previously, nylon fabric exporters had earned
some rights to replenish their stocks of nylon fibres through imports. Dhirubhai
argued that if he could sell nylon or other manufactured textiles (known as ‘art silks’
at Rs 4.25 a yard, more than double the price stipulated in the old scheme, the
exporter should be rewarded by permission to import PFY, which was in greater
domestic shortage because local production was far below demand.
This resulted in what was called the Higher Unit Value Scheme, which made
Dhirubhai a fortune while it lasted. At that time, the domestic price of PFY was seven
or more times higher than the prevailing international price. Even if the nylon or
polyester exports fetched only a quarter or one third of cost, this was more than
offset by the 600 per cent or more profit on the PFY imports.
Reliance went into a high-profile export drive, targeting some of the weaker
economies of the world. Poland was one focus, with fashion shows mounted in
Warsaw and delegations of Polish trade officials lavishly hosted by Dhirubhai in
Bombay. Another was Saudi Arabia, where Dhirubhai had another old Aden colleague
from Besse & Co’s Halal Shipping division, Bharat Kumar Shah, then working as a
trader in Jeddah and acting as Reliance’s Mid-East Co-ordination manager’. Dhirubhai
would take out full-page advertisements in The Times of India to announce special
charter fights taking his export products to foreign markets.
But many senior figures in the textile industry still believe this export business was
mostly bogus. ‘f these goods were not saleable at two rupees, how could they sell at
four rupees?’, one remarked. According to this theory, Dhirubhai would have
provided his own export earnings, by sending the money out to the ostensible buyer
overseas through the illegal foreign exchange channels known as havala (accepting
the 20 per cent havala premium on the official exchange rate). The goods would be
sent to a free port such as Singapore or Dubai, to avoid customs duty, and then he
disposed of at giveaway prices, left to rot on the docks, or even dumped at sea. The
effective outgoings would be the 20 per cent havala premium on the funds sent out,
and the 60 per cent of the same funds actually spent on buying PFY overseas for
import back into India. The returns would be this 60 per cent multiplied by seven or
more. The profit would be 425 per cent of the outlay. And as long as Dhirubhai had
the ‘export remittance’s arriving back in his account in Bombay, he could claim credit
for doing his bit for India’s trade balance.
In an interview with the magazine Business India in April 1980, Dhirubhai said
Reliance Commercial Corp accounted for more than 60 per cent of the exports made
under the Higher Unit Value Scheme. ‘he schemes were open to everyone,’ he said.
‘I cannot be blamed if my competitors were unenterprising or ignorant.’s Textile
trade sources familiar with that era say this was not exactly the case. The adoption
of the Higher Unit Value Scheme was not widely publicised in 197 1. Dhirubhai had a
clear run of one or two years before other exporters began trying to take advantage
of the same scheme, or putting up similar proposals for other categories of textile
exports. One of these exporters, Bipin Kapadia, later recounted his experience to
Bombay police who sought it as background to the sensational murder conspiracy
case of 1989 (see Chapter 13).