Spinning mills in Tamil Nadu have decided to cut down production. The reason is a decline in demand for synthetic yarn. Mills have decided to stop production on Saturdays and Sundays for a few weeks to not pile up stocks. Tamil Nadu has some 90 mills producing yarns. The state produces 40,000 tons of high count synthetic yarns such as polyester cotton yarn per month.

Due to the decline in demand these mills are incurring 10 to 15 per cent loss. India is the world's biggest exporter of cotton yarn. Tamil Nadu contributes 60 per cent of national production and is home to the bulk of India's mills, which employ 400,000 people. Tamil Nadu’s spinning mills account for nearly 47 per cent of the total spindle capacity in the country.

Mills in Tamil Nadu have also been suffering from a shortage of power along with rising labor cost. This makes competing in the global market difficult. Cotton, power and labor account for 90 to 92 per cent of mill costs. And mills in Tamil Nadu are hit on all three counts. Another problem they are facing is the unfavorable export-import tax structure.