Govt weighs export floor price for cotton yarn to ensure domestic supplies

What is a minimum export price (MEP), and how would it limit exports of cotton yarn?

A minimum export price, or MEP, is the lowest price at which a product may be exported. The government uses it when domestic prices or supplies face pressure. For cotton yarn, the aim would be to discourage cheap overseas shipments and protect availability for Indian textile manufacturers.

For example, if officials set an MEP of ₹X per kilogram, an exporter could not legally ship cotton yarn below ₹X. The exact level has not been announced. Before imposing one, the government considers domestic prices, production, availability and the need to increase local supplies.

The proposal is still under discussion in the textiles ministry. It comes as cotton yarn prices have climbed about 60%, from roughly ₹250 per kg in early 2026 to nearly ₹400. An MEP could support domestic users, but it would also restrict exporters' ability to sell below the floor.

How sharply have cotton yarn prices, Indian cotton production, and cotton yarn exports changed recently?

Cotton yarn has become sharply more expensive. Prices rose around 60%, from about ₹250 per kg in early 2026 to nearly ₹400 per kg. That increase is squeezing manufacturers that use yarn for fabrics and garments.

India's cotton output has moved in the opposite direction. Production fell from 325.22 lakh bales in 2023-24 to 297.24 lakh in 2024-25, then to 290.91 lakh in 2025-26. Cotton exports also rose: yarn shipments increased year-on-year by 11.9% in April, 22.6% in May, 15.8% in June and 34.1% in July.

Together, these figures show tighter domestic conditions alongside stronger overseas shipments. The area planted with cotton also declined from 126.88 lakh hectares to 114.82 lakh hectares over the same period. The government is therefore examining an MEP, although no price has been set.

Why is the Indian government considering an MEP for cotton yarn now?

The proposal responds to a supply squeeze. Cotton yarn prices have risen about 60%, reaching nearly ₹400 per kg, while India's cotton production has fallen for two successive years. Higher input costs matter because cotton-based products made up 41.2% of domestic textile and clothing demand in 2024.

At the same time, overseas shipments are increasing. Cotton yarn exports rose year-on-year in every month from April through July, reaching 1,15,021 tonnes in July. Industry representatives attribute the price increase to supply-side constraints and stronger overseas demand. An MEP could discourage exports priced below the official floor and help retain supplies domestically.

The textiles ministry is vetting the industry proposal and discussing delivery pressures with apparel manufacturers. The government also says keeping Indian garment exporters cost-competitive is a priority. However, officials have not indicated the MEP level, and some experts call the measure temporary.

How have US restrictions on cotton from China’s Xinjiang region contributed to higher cotton yarn prices?

The price surge is occurring against US restrictions on cotton originating from China's Xinjiang region. Washington alleges that Uyghurs and other ethnic minorities there are subjected to forced labour. The article presents these restrictions as part of the backdrop to India's sharply higher cotton yarn prices.

The immediate market effect described by industry representatives is tighter supply and stronger overseas demand. They attribute the price increase to supply-side constraints and rising international demand. With less cotton yarn readily available for Indian users, exporters and overseas buyers can add pressure to the market.

The article does not quantify how much of the price increase came specifically from the US restrictions. It reports the broader context alongside India's falling cotton production and rising yarn exports. Prices nevertheless rose about 60%, from ₹250 per kg in early 2026 to nearly ₹400, prompting the MEP discussion.

What could happen to Indian textile and garment manufacturers if cotton yarn prices remain high?

High cotton yarn prices directly raise costs for manufacturers that turn yarn into fabrics and garments. Cotton-based products represented 41.2% of India's domestic textile and clothing demand in 2024, so the pressure affects an important part of the industry. Rising costs can make Indian products less competitive.

The industry has already reported practical pressure. Cotton yarn prices climbed from about ₹250 per kg to nearly ₹400, a roughly 60% increase. Rahul Mehta said manufacturers were preparing for the summer season and sourcing yarn and other raw materials. He warned that continued price increases would naturally affect the cost competitiveness of Indian garments.

Manufacturers could face difficulty meeting delivery deadlines for upcoming orders while managing higher input bills. The textiles ministry is discussing the issue with apparel manufacturers and says export competitiveness is a priority. An MEP could support local availability, but the article identifies it as a temporary solution rather than a cure for declining production.

Who would gain and who could lose from restricting cotton yarn exports through an MEP?

An MEP would mainly favor Indian manufacturers that buy cotton yarn for fabrics and garments. By making low-priced exports harder, it could help preserve supplies for domestic users facing sharply higher input costs. The government is considering the measure specifically to safeguard local availability and textile manufacturers.

Cotton yarn exporters could face the opposite effect. They would have to meet the official minimum price, reducing their ability to ship at lower prices. Overseas buyers could also encounter fewer low-priced offers. The article does not identify specific companies or quantify these possible effects, so the precise distribution of gains and losses remains uncertain.

The policy challenge is to support domestic manufacturers without damaging India's export business. The textiles ministry says keeping garment exporters cost-competitive is a priority. Since no MEP level has been announced, its actual impact cannot yet be measured. Experts also warn that an export floor would be temporary unless production improves.

Why might increasing cotton acreage and production be a more lasting solution than an export-price floor?

An MEP can limit exports, but it does not create more cotton or yarn. It is therefore a short-term tool for managing domestic availability. India's cotton production has fallen from 325.22 lakh bales in 2023-24 to 290.91 lakh in 2025-26, making the supply problem more fundamental.

Increasing acreage and yields would expand the cotton available to spinners and manufacturers. The planted area fell from 126.88 lakh hectares to 114.82 lakh hectares over the same period. Raja M. Shanmugam called an MEP temporary and said capacity and production must be aligned from cotton procurement onward. He also argued that CCI should facilitate the market rather than act as a trader.

More production could support both domestic industry and exports, rather than favoring one through an export restriction. The article does not specify a production programme or forecast its results. For now, the ministry is vetting the MEP proposal while industry experts press for longer-term supply measures.

Key Facts:

📌 An MEP is a floor below which a product cannot be exported.

📌 The government has not indicated a possible cotton yarn MEP level.

📌 Domestic availability is a key reason for considering the proposal.

📌 Cotton yarn prices rose around 60% to nearly ₹400 per kg.

📌 Cotton output fell to 290.91 lakh bales in 2025-26.

📌 July cotton yarn exports rose 34.1% year-on-year.

📌 The textiles ministry is vetting an industry proposal for a cotton yarn MEP.