Crisil forecasts QCO rollback will restructure Indian fibre and yarn competitiveness

The government’s decision to rescind Quality Control Orders (QCOs) on Man-Made Fibre (MMF) inputs, including polyester and viscose yarn, marks a definitive shift in the global positioning of India’s textile industry, particularly for

downstream apparel exporters.

While the immediate effect is: the critical relief to readymade garment units that saw 12.91 per cent cumulative decline in exports in October due to 50 per cent US tariff, the core impact is on the domestic fibre and yarn supply chain. Previously, mandatory BIS certification on imported raw materials like Purified Terephthalic Acid (PTA) and Mono Ethylene Glycol (MEG) increased input costs by 10-30 per cent above global rates, rendering Indian yarn uncompetitive against rivals like Vietnam and Bangladesh, which enjoy unfettered, cheaper sourcing.

Crisil Ratings, analyzing 20 polyester yarn manufacturers who represent nearly 45 per cent of the sector's revenue, reports a dual challenge: while the rollback improves overall MMF export volume by streamlining supply, increased competition from cheaper imports originally curbed by the QCOs will likely keep the revenue growth for domestic polyester yarn makers flat at 3-5 per cent next fiscal year.

Moreover, Crisil predicts moderating realizations will reduce spreads for these manufacturers by 10-15 per cent, leading to a 100 basis point drop in operating margins, underscoring the fierce competition now open for MMF intermediates. This necessary sacrifice by upstream producers, however, enables the entire textile value chain to pursue the national target of $100 billion in exports by 2030 by finally making Indian-made finished goods cost-competitive globally.