India’s cotton yarn market has weakened following the recent reduction in benefits under the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme, with exporter margins narrowing sharply and spot prices correcting across key centres.
Export rebates for cotton yarn have been reduced from around 3.4% of free-on-board (FOB) value to 1.7% , representing a 50% cut. The revision has had an immediate impact on the spinning industry, where operating margins are typically thin.
South India, which accounts for nearly 60% of the country’s spinning capacity, has reported slower trade over the past week. In major hubs such as Coimbatore and Tiruppur, yarn prices have declined by Rs. 2 (US $ 0.022) to Rs. 5 (US $ 0.055) per kilogram across several widely traded counts.
In Mumbai, prices of 30-count carded cotton yarn fell by approximately Rs. 3 (US $ 0.033) per kilogram, while 40-count combed yarn dropped by around Rs. 4 (US $ 0.044) per kilogram compared with the previous week of February 2026. Overall, spot yarn prices have corrected by 1 to 2% in the short term.
According to Texprocil trade statistics, India’s cotton yarn exports stood at about US $ 3.77 billion in FY2023–24. Industry estimates suggest that a 1.7% reduction in export rebates could result in an annual earnings loss of roughly US $ 60 million. Given that most spinning mills operate with profit margins of only 3 to 5% , the impact is considered significant.
Domestic demand has also remained cautious. Fabric and garment manufacturers are reported to be holding adequate inventories and have not placed aggressive fresh orders. Capacity utilisation at several spinning units has reportedly slipped to between 75 and 80% , compared with levels exceeding 85% during stronger export cycles.
The competitiveness gap has emerged as a growing concern for the industry. Producers in Bangladesh and Vietnam continue to benefit from relatively stable export support structures and trade advantages. Market participants note that even a 1% pricing differential can influence sourcing decisions in large-volume international contracts.
Industry associations have urged the Government of India to review the revised rebate rates, arguing that the spinning sector supports more than 50 million jobs across the textile value chain and plays a critical role in rural employment and cotton procurement.
In the near term, market participants expect price recovery to depend on clarity regarding export incentives, stability in domestic cotton prices and an improvement in global apparel demand. Until these factors align, the cotton yarn market is likely to remain subdued, with limited upward momentum.
