Indian yarn vs Bangladesh mills: Why a trade lifeline has become an industry flashpoint

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• Bangladesh spinning mills warn of shutdown over duty-free yarn imports
• Over 50 mills have closed; nearly 1 million jobs at risk if shutdown occurs
• Millers demand end to duty-free imports, energy relief, and policy changes

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Bangladesh’s spinning mills have issued a stark warning that operations across the country could be halted from February 1 unless the government withdraws duty-free facilities for imported yarn, according to a report by India Today.

Mill owners say prolonged losses, energy shortages, and growing inventories have pushed the sector to the brink.

According to industry representatives, the warning has been formally conveyed to the interim government as well as to the National Board of Revenue. The Bangladesh Textile Mills Association (BTMA) says spinning units are no longer able to operate sustainably under current conditions.

The association estimates that more than 50 textile mills have already closed, leaving thousands without work. A nationwide shutdown, they caution, could affect close to one million workers and risk wider social unrest.

Cheap imports and unsold stock

At the centre of the dispute is the bonded warehouse system, which allows garment manufacturers to import yarn without paying duties. Domestic millers argue that this policy has opened the door for large volumes of inexpensive foreign yarn -- primarily from India -- to flood the market.

BTMA claims unsold inventories have crossed Tk 12,000 crore, with locally produced yarn unable to compete on price.

Government figures indicate that Bangladesh imported nearly 70 crore kilograms of yarn in 2025, valued at around $2 billion, and about 78 percent of those imports originated in India.

Millers insist that duty-free imports have destroyed any level playing field and are calling for the immediate withdrawal of zero-duty benefits, particularly for 10 to 30 count cotton yarn.

Energy crisis adds pressure

The difficulties facing spinning units have been compounded by persistent gas shortages. Millers say erratic supply, rising tariffs, and lack of subsidised rates have sharply reduced output.

Industry estimates suggest losses of nearly $2 billion over the past three to four months due to energy-related disruptions. Many factories report operating at roughly half their normal capacity.

Alongside changes to import policy, millers are demanding uninterrupted and subsidised gas supply, temporary VAT relief, reduced interest rates on bank loans, and structured discussions with the government to stabilise the sector.

Exporters push back

Garment exporters, however, oppose any move to suspend duty-free yarn imports, arguing that Bangladesh’s export competitiveness depends heavily on access to affordable and consistent raw materials.

They maintain that locally produced yarn -- especially in the 10 to 30 count range -- is significantly more expensive than imported Indian yarn and often fails to meet the quality expectations of global apparel brands.

Exporters also contend that international buyers frequently specify foreign yarn and fabric, making bonded imports essential for fulfilling orders.

Indian exporters defend trade flow

Indian suppliers echo the concerns raised by Bangladeshi garment manufacturers. Amit Soti, an Indian yarn exporter, told India Today, “Bangladesh garment exporters receive duty-free benefits on raw material imports under bonded facilities. Suspending bonded imports of yarn will increase costs for manufacturers, as locally produced yarn is more expensive and lower in quality compared to Indian yarn. This will ultimately hurt Bangladesh’s export industry.”

His remarks underline the broader regional implications of any policy shift, given the deep integration of South Asian textile supply chains.

Policy crossroads for a key industry

The dispute has exposed a widening divide between two powerful segments of Bangladesh’s textile and apparel ecosystem: spinning millers seeking protection from imports and garment exporters demanding low-cost inputs.

While millers argue domestic capacity is sufficient to meet national demand, exporters say restricting imports would raise production costs and threaten orders from international buyers.

With the Ministry of Commerce having recommended withdrawal of the duty-free facility to the revenue authorities, pressure is mounting on the interim government to take a decision.

Bangladesh’s textile and apparel sector remains one of the country’s largest employers and its most important source of export earnings.

Industry stakeholders warn that without a carefully balanced approach, the standoff could deepen economic stress and trigger prolonged instability across the value chain.