India targets customs reforms to boost textile machinery localization

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India’s yarn spinners and fabric manufacturers face capital efficiency constraints as domestic machinery localization lags behind growing yarn and fabric production capacity. With the Ministry of Textiles extending the Production Linked Incentive (PLI) scheme application window through March 2026, over 84 new investment proposals worth Rs10,789 crore have entered the pipeline for man-made fiber (MMF) yarns, technical textiles, and advanced weaving units. However, operational expansion across major textile clusters remains hindered by inverted duty structures on critical imported engineering components, including servo drives, electronic dobbies, and precision bearings.

Domestic mill operators pay standard customs duties on specialized parts, whereas complete imported spinning frames and shuttleless looms enter under preferential tariff brackets. Aligning component import duties with complete machinery tariffs is essential to build an indigenous capital equipment base for yarn and fabric producers, says Ketan Sanghvi, Chairman, India ITME Society.

A case in point is that of Gujarat-based weaving units, where modernizing rapier looms with domestically assembled electronic Jacquard heads reduced fabric defect rates by 14 percent and lowered maintenance expenses. Establishing dedicated component engineering parks and expanding PLI incentives to machinery builders could unlock $3 billion in domestic equipment manufacturing, directly strengthening yarn and fabric export margins.