The 'hank yarn obligation', an age old stipulation obligating the textile mills to produce a minimum of 40 per cent of the yarn as hank yarn, is a deterrent to growth and threat to their economic viability. According to the textile entrepreneurs from Tirupur, though there are certain exceptions provided on the clause when it comes to production of blended and hosiery yarn, this old rule holds no significance in the present textile scenario existing in a liberalised economical condition. They wanted the obligation rule either be scrapped or reduce the obligation limit to 10 per cent.

D Prabhu, secretary of Texpreneuers Forum, points out that with the introduction of schemes like Technology Upgradation Fund Scheme, many handloom weavers have moved either to power looms or auto looms. Hence, the demand for hank yarn has come down. The textile units were forced to produce 40 per cent of the yarn as hank yarn without having adequate demand in the market.

Prabhu further says that the forum has pointed out in its representation to the Union Textiles Ministry that due to the hank yarn obligation rule, about 3.21 crore kilograms of hank yarn is produced in the state in a month against the actual requirement of 16.22 lakh kg. Scenario across the country is also almost the same. Textile mill owners are of the opinion that the report of an external agency appointed by the government to study the repercussions of hank yarn obligation on textile sector should be released soon.