A large number of spinning mills in the region are increasingly opting to upgrade their units to produce compact yarn through retrofits. They are also installing compact yarn spinning systems in their Greenfield project as well as for expansion. According to K Selvaraju, secretary general, Southern India Mills' Association (SIMA), mills are opting for retrofits as the costs are lower and weaving units are opting for faster air jet looms.

Textile machinery major Lakshmi Machine Works (LMW), which commands a 60% market share in the spinning machinery segment in the country, has either upgraded or supplied 5 lakh spindles that are capable of producing compact yarn in the last one year.

About 40% of the upgradation (to compact yarn) is happening through retrofits. As retrofitting costs only around 1,350 per spindle, installing a new compact yarn unit costs about 6,000 per spindle, Sankar vice-president, marketing, LMW said.

A lot of air jet looms are being installed in the weaving clusters of Somanur and Tiruchengode, which require compact yarn that have less hairiness, better strength and can be used to make higher quality fabric.

Branded items are made mostly using compact yarn. Even hosiery units are demanding compact yarn now . Textile mills in Tamil Nadu have added nearly 1 million spindles that are capable of producing compact yarn in the last seven to eight years. It is a niche market. But it is picking up, Selvaraju said.

Despite its growing popularity, compact yarn spinning systems account for less than 10% of the total installed spinning capacity in the country.

The textile industry has only about 3.5 million spindles that can make compact yarn. The total installed spinning capacity stood at around 49.8 million spindles at the end of November 2014.

Though the quality of yarn is much better, compact yarn making spindles are being installed mostly in large mills as machinery costs are high and improvement in realisations are modest.

According to P Nataraj, managing director, KPR Mill, customers like quality. But the realization (from compact yarn) is not that high.