India’s Strict Quality Control Order on Viscose Staple Fibre Imports Disrupts Textile Supply Chain

The implementation of a stringent Quality Control Order (QCO) on viscose staple fibre (VSF) imports in India has led to a significant shift in the country’s textile supply chain. The order, which came into effect on August 15, 2023, has resulted in a 65% drop in VSF imports, posing challenges for small spinning mills that rely heavily on imported VSF for their production.

Key Facts

• The QCO mandates that all imported VSF must meet specified quality standards and be certified by an accredited agency
• VSF imports dropped from 120,000 tonnes in Q2 2023 to 42,000 tonnes in Q4 2023
• Small spinning mills, which account for 30% of India’s VSF consumption, have been most affected by the QCO
• Domestic VSF producers have increased their prices by 10-15% since the implementation of the QCO

Impact on the Textile Supply Chain

The Quality Control Order has disrupted the textile supply chain in India, leading to significant changes in the sourcing and pricing of VSF:

• Reduced Imports: The 65% drop in VSF imports has created a supply shortage in the domestic market, particularly for small spinning mills that lack the scale to source VSF directly from international suppliers.
• Increased Domestic Prices: Domestic VSF producers have capitalized on the reduced import competition by raising their prices, further squeezing the margins of small spinning mills.
• Shift to Alternative Fibres: Some spinning mills have started exploring alternative fibres, such as cotton and polyester, to mitigate the impact of the VSF supply disruption.
• Consolidation in the Spinning Sector: The challenges posed by the QCO may lead to consolidation in the spinning sector, with larger mills better positioned to weather the supply chain disruption.

VSF Import Trends (in tonnes)

Challenges for Small Spinning Mills

Small spinning mills, which account for a significant portion of India’s VSF consumption, have been disproportionately affected by the Quality Control Order:

• Limited Bargaining Power: Small mills lack the scale and bargaining power to negotiate favourable terms with domestic VSF producers or international suppliers.
• Higher Input Costs: The increase in domestic VSF prices has led to higher input costs for small mills, squeezing their already thin margins.
• Limited Access to Finance: Many small mills struggle to access affordable financing to tide over the supply chain disruption and invest in alternative fibres or technologies.

The Road Ahead

To mitigate the impact of the Quality Control Order on the textile supply chain, several measures can be considered:

• Gradual Implementation: A phased implementation of the QCO, with a longer transition period for small spinning mills, could help them adapt to the new quality standards and sourcing requirements.
• Support for Small Mills: Targeted financial and technical assistance for small spinning mills, such as concessional loans and training programs, can help them navigate the supply chain disruption and invest in alternative fibres or technologies.
• Dialogue with Stakeholders: Regular consultation with industry stakeholders, including spinning mills, textile manufacturers, and VSF producers, can help identify and address the challenges posed by the QCO.
• Encouraging Domestic Production: Incentives for domestic VSF producers to expand their capacity and improve their quality standards can help reduce the country’s dependence on imports and create a more resilient textile supply chain.

The enforcement of the Quality Control Order on viscose staple fibre imports has led to a significant disruption in India’s textile supply chain, with small spinning mills bearing the brunt of the impact.

• The 65% drop in VSF imports, coupled with the increase in domestic prices, has created a challenging environment for these mills, forcing them to explore alternative fibres and business strategies.
• As the textile industry grapples with the fallout of the QCO, it is crucial for policymakers and industry stakeholders to work together to find solutions that balance the need for quality control with the interests of small spinning mills and the broader textile supply chain.
• By adopting a gradual and supportive approach to the implementation of the QCO, and by investing in domestic VSF production and small mill capacity building, India can create a more resilient and sustainable textile industry that benefits all stakeholders.