The bifurcation of Andhra Pradesh into two states may tear its textile industry apart, making one state a dominant cotton producer and the other a hub for mills. While the Telangana region accounts for almost 60 per cent of the cotton production of the state, coastal Andhra and Rayalseema regions have the bulk of the textile mills. 

Several mills in Andhra Pradesh used to supply to international brands and retail chains. However, since 2010, exports started dipping with the global economic downturn and competition from Bangladesh and China. This was further aggravated with domestic problems including power cuts, rising raw material costs and a stiffer tax regime, which led to cut in production and drop in turnover. Now, the textile mills have to confront a new challenge on the home turf, the bifurcation of the state. 

The state has about 150 mills, out of which 50-odd are located in the Telangana region, with coastal Andhra having a lion’s share. If mills have to buy cotton from the new state, they would have to shell out additional taxes, which would further squeeze their margins. 

It will be a new situation for mills from Andhra which would have to buy cotton from the new state, paying CST and losing out on Modvat credit.