In the April-June period of this fiscal, India’s exports of cotton yarn fell by 34.6 per cent as compared to the same period last year. The steep fall has been caused by a variety of reasons, including a decline in exports to leading export markets like China, Bangladesh, South Korea and the duty-free access given for import of cotton yarn by China to countries like Pakistan and Vietnam. The slowdown has resulted in the closure of many mills – approximately one-third of the whole spinning capacity across India.

Considering the large scale investment in the spinning sector and the sluggish demand in the domestic markets, exports are the only avenue to ensure uninterrupted production and capacity utilization. Even though cotton yarn is a value added product, it has been excluded from export benefits like interest subvention, the Merchandise Export of India Scheme and the Rebate of State and Central Taxes and Levies schemes. There is no rebate on embedded taxes like agricultural cess, mandi tax, power and fuel surcharge, which are incurred in the production process.

Cotton yarn sector is one of the pillars of Indian textile industry and is also highly modernised and technology driven and also provides sustainable income to farmers.