The spinning yarn industry in Punjab has serious grievances. They feel the government is not doing enough to protect them from uneven competition from neighboring states. They says the Punjab government will suffer a revenue loss of Rs 1,500 crores for the year 2015-16 by way of VAT exemption for yarn coming from outside the state. Another issue is that the new industry policy related to spinning has not been implemented yet.

Apparently of the 130 spinning mills in the state around half have already shut down. Mill owners say they have suffered huge losses due to building up of cotton yarn stock. And this in turn is due to lack of demand in domestic market and curbs on cotton yarn exports.

Escalating input costs is another problem. Shortage of labor means that capacity can’t be used fully. This in turn hits bottom lines. Mill owners say neighboring states impose no VAT on their spinning yarn mills whereas the Punjab government imposes a 6.6 per cent VAT on mills in the state. Besides, Punjab also levies a 10 per cent surcharge on the mills. They say that when the yarn is brought into Punjab from neighboring states, the carriers have to pay just two per cent central sales tax.