Cotton yarn trade in North India grinds to a halt as new payment rule sparks confusion

Trade in cotton yarn across North India, including major hubs like Ludhiana, has witnessed a significant slowdown following the implementation of a new payment rule. The rule, intended to improve transparency and prevent tax evasion, has instead caused confusion and apprehension among yarn traders and textile manufacturers.

The new rule mandates the use of Electronic Bank Transfer (EBT) for all yarn transactions exceeding a specific amount. While the objective is commendable, the sudden implementation and lack of clear guidelines have left many stakeholders scrambling.

Concerns include

Technical issues: Many smaller players lack the infrastructure and knowledge to seamlessly transition to EBT, leading to delays and disruptions.

Working capital constraints: EBT requires immediate payment, impacting the working capital flow of businesses accustomed to credit periods.

Trust factor: Some traders hesitate to switch to EBT due to trust issues and concerns about delayed payments or non-receipt of goods.

These factors have resulted in a significant drop in yarn trading activity, impacting businesses across the supply chain. Spinning mills are facing reduced demand, yarn traders are struggling with stalled inventory, and powerloom weavers are experiencing yarn shortages.

Industry leaders have expressed their concern. Ludhiana Yarn Spinners Association says the new rule is a positive step in the long run, but the sudden implementation without proper training and infrastructure support has created chaos.

North India Textile Mills Association too says, the current slowdown is impacting everyone in the industry and has requested the government to consider a phased implementation with proper guidance and support for smaller players to ensure a smooth transition without jeopardizing livelihoods.

While the long-term benefits of the new payment rule are undeniable, addressing the immediate concerns and providing adequate support is crucial to prevent further disruption and ensure a smooth transition for the North Indian cotton yarn industry.