How cheaper Indian yarn throws Bangladesh textile out of competition
More than 50 mills closed, factories selling yarn often at losses, says BTMA.
Highlights:
- Bangladesh textile mills grappling with severe slump in yarn and fabric sales
- Warehouses overflowing with unsold stock
- Garment makers increasingly turn to cheaper imports from neighbouring India
- Over past three years, India has rolled out multiple incentive schemes for textile exporters
- Bangladesh has reduced cash incentives for local millers
- BTMA says local yarn sales have fallen by about 30% from normal levels
- According to NBR, yarn imports from India rose by 41% in 2024
Bangladesh's textile mills are grappling with a severe slump in yarn and fabric sales and warehouses are overflowing with unsold stock as garment makers increasingly turn to cheaper imports from neighbouring India.
Industry insiders say the price gap between locally produced and imported yarn has widened sharply in recent years, largely due to India's generous export incentives and Bangladesh's declining policy support.
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Indian subsidies shift the balance
Over the past three years, India has rolled out multiple incentive schemes for its textile exporters, while Bangladesh has reduced cash incentives for local millers. This has given Indian yarn a price advantage of around $0.30 per kilogram, according to the Bangladesh Textile Mills Association (BTMA).
"Indian yarn is being sold in Bangladesh at lower – sometimes dumping – prices due to government export incentives," said BTMA President Showkat Aziz Russell. "We've submitted this evidence to our commerce ministry."
According to the BTMA, local yarn sales have fallen by about 30% from normal levels, forcing many millers to sell at breakeven or even at a loss, while dozens of textile mills have suspended operations. Industry leaders warned that the $23 billion textile industry is heading towards a major downturn.
"We've prepared a list showing that more than 50 factories have either partially or fully shut down," Russell told The Business Standard. "We can't disclose their names as it could harm them."
Widening price gap drives import surge
Locally spun 30-count yarn is priced between $2.95 and $3.05 per kg, while Indian yarn costs about $2.68 to $2.72 per kg (C&F Chattogram port). Two years ago, the difference was barely $0.05 per kg.
"This $0.30 saving per kilogram makes all the difference," said Fazlee Shamim Ehsan, managing director of Fatullah Fashions Limited. "Two years ago, I sourced almost all my yarn from local mills. Now, 90% comes from India."
According to the National Board of Revenue, yarn imports from India rose 41% in 2024. Russell said imports have increased further in 2025, although official data is still being compiled.
Factories running at a loss
Saleudh Zaman Khan, BTMA vice president and managing director of NZ Spinning Mills Ltd, said many mills are "forced to sell at breakeven or even at a loss" as knitwear producers shift to Indian yarn.
"Most local factories now have stockpiles, and many are being forced to sell at breakeven or even at a loss," he added.
Bangladesh has 1,863 textile mills, including 527 spinning mills, of which nearly 300 export their products. BTMA officials said that as export demand declines, 73 export-oriented mills have started selling yarn domestically, often without paying VAT, undercutting local VAT-paying mills and creating further market instability.
Industry insiders warn that if the textile sector falls into crisis, it could have a negative ripple effect across the economy, including banks, insurance, and logistics.
Banks have already become cautious about financing the sector. A senior official of a leading commercial bank, involved in apparel sector financing, told TBS, "We are now avoiding term loans to textile mills wherever possible, and we have sharply reduced working capital financing. Almost all textile mills we finance are struggling to stay afloat."
He added, "We are concerned about financing in this sector. Some factories are selling yarn at below $3 per kilogram, incurring losses, yet they continue to sell at even lower prices."
Textile mill owners say local mills can supply the yarn and fabric needed for 100% of knitwear and 50% of woven garments. The domestic textile and garments market is worth $12 billion per year, and local mills have the capacity to fully meet this demand.
Why India is gaining ground
Industry leaders blame India's Remission of Duties and Taxes on Exported Products (RoDTEP), along with electricity, capital, and worker subsidies, for the current disparity.
"Indian exporters receive an extra $0.20-$0.25 per kg through these schemes," said Saleudh Zaman Khan. "In contrast, our costs have risen due to lower cash incentives (from 4% to 1%), higher utility bills, and increased financing costs."
He said some Indian exporters are selling yarn in Bangladesh below domestic market prices, effectively "dumping" their products.
Textile millers blame bond misuse, RMG exporters say it's minimal
Khorshed Alam, chairman of Little Star Spinning Mills Limited, pointed out that this issue is compounded by bond misuse and smuggled yarn. "Exploiting lax customs oversight and the 32% wastage allowance, huge amounts of illegal yarn and fabric are being sold in the domestic market, leaving local mills unable to sell their products," he said.
He noted that although the domestic apparel market is worth $12 billion, local mills sell only $7.5 billion annually, while the remaining $4.5 billion worth of yarn and fabric is being sold illegally, a major reason why local mills struggle to offload their products.
A BTMA director, on condition of anonymity, told TBS that fabric imports through bond misuse have risen by 65% in the last eight months.
Shahid Alam, deputy managing director of Shah Fatehullah Group, a Narayanganj-based spinning mill, held the illegal sale of bonded yarn and fabric in the open market responsible for the current situation. "We've raised this issue with the authorities many times, but the cycle hasn't stopped," he said.
However, garment exporters argue that these claims of misuse are not entirely accurate.
Fazlee Shamim Ehsan, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), told TBS, "While some bond misuse occurs, it is minimal. The reality is that due to differences in policy support between India and Bangladesh, our entrepreneurs are falling behind in competition."
Warehouses overflowing, no room for yarn
The owners of Shah Fatehullah Textile Mills said due to the drop in yarn sales, their warehouses are full, forcing them to store unsold yarn even inside the factory.
Shahid Alam told TBS, "Our warehouses are full, so now we have to store yarn inside the factory, as sales have dropped significantly."
He added, "We have already been forced to suspend production from 25,000 spindles, and we plan to shut down another 25,000 soon."
Khorshed Alam, chairman of Little Star Spinning Mills Limited, echoed similar concerns. He told TBS, "Normally, about 10% of our produced yarn remains in stock, but in the last three months, it has exceeded 50%. We've even run out of warehouse space."
He added that most other spinning mills are facing the same situation.
In the dyeing and finishing sector, the picture is equally bleak. Abdullah Al Mamun, managing director of Abed Textile Processing Mills Ltd, said, "Normally, we run at 70% capacity during this period. This year, it's below 50%. The market is flooded with imported yarn and fabric, and local demand has collapsed."
He also blamed the government's decision to reduce the cash incentive for using local yarn, saying it has severely weakened domestic demand.
