Cotton yarn is a value added product in India but it has been excluded from export benefits like interest subvention. The industry wants cotton yarn to be included in the interest subvention scheme, saying that this will ensure only products are exported and not taxes and also will provide the much needed impetus in the context of rising cotton prices and the appreciating rupee which are eroding competitiveness. A rebate on embedded taxes like agricultural cess, mandi tax, power and fuel surcharge incurred in the production process is also sought. As of now cotton yarn is excluded from the ROSCTL scheme which rebates these levies.

Cotton yarn sector is one of the pillars of the Indian textile industry and is also highly modernised and technology driven and provides sustainable income to farmers. But cotton exports in the first quarter fell 33 per cent compared to the same quarter last fiscal. The steep fall has been caused by a variety of reasons including decline in exports to leading markets like China, Bangladesh, South Korea and the duty-free access given by China to cotton yarn from countries like Pakistan and Vietnam.

If the trend of declining exports were to continue in the next quarter, several spinning units are expected to close, resulting in layoffs.