Indian textile and clothing industry is facing a severe liquidity crisis mainly due to the huge accumulation of dues, especially TUF subsidies.

The industry has requested that the dues and TUF subsidies be released along with stimulus measures such as debt restructuring, e-auctioning of CCI procured cotton and extension of export credit. Consequent to the 28 per cent increase in the minimum support price for cotton, Indian cotton has become expensive when compared to international cotton prices, making Indian cotton and textile products uncompetitive in export markets.

This has resulted in a sizeable increase in imported cotton during the current season. The country is likely to end with over 50 lakh bales in closing stock for the current season due to reduced exports and increased imports. The cotton spinning sector is currently facing an unprecedented crisis due to the excess production capacity to the tune of seven million spindles. This was created taking advantage of incentives offered by the textile policies of states like Gujarat, Maharashtra and Andhra Pradesh. Cotton yarn consumption in the domestic market has stagnated during the last four years. The 35 per cent fall in yarn exports in recent months has aggravated the situation. The sluggish demand has severely affected cotton farmers as the country is left with excess cotton production.