The Gujarat cotton ginning industry is overcrowded. There is overcapacity which prevents even legitimate players and industrialists from earning sufficient returns on the installed capital. Gujarat has a production capacity of around one crore cotton bales but the ginning industry setup has the capacity to process more than three crore cotton bales. This is clearly overcapacity and has left many medium and small scale units in the lurch thus forcing some of them to even go out of operation. Their bank accounts in turn feel the impact of the stress, turning them into non performing assets ultimately.

All this further tends to hurt compliant industrialists who will be unable to make ample profitable returns if the loss making firms continue their business in the already overcrowded market.

Entrepreneurs say the stress should be on reviving the spinning, weaving and garmenting industries more than the ginning industry since these are the sectors which require the services of the ginning industry. They say that if, instead of exporting yarn, the garment industry within India is made capable enough to process the whole cotton ginning industry’s output then not only will it make the Indian garment industry the most self-sufficient sector it will also help the ginning industry recover.