"It looks like someone in Panipat has discarded a lot of old winter clothes, and that too in the summer," I remarked to the driver. He replied, "These clothes haven't been discarded. Some trader here must have paid at least Rs 30,000 for them!" I was amazed. Why would anyone pay that kind of money for rags? "They are reprocessed, you see," the driver explained, "There are several units here that convert rags into, what is known as Shoddy Yarn."

I learnt that Panipat is the country's biggest producer of shoddy yarn, importing rags from Europe, USA, Asia and Canada and spinning them into inexpensive yarn. In fact, its 350-plus shoddy spinning units give Panipat the distinction of having the largest number of shoddy spinning units in the world (Italy's in the second place). Intrigued by what I'd heard, I decided to visit a shoddy yarn unit in the district.

Shoddy yarn, I was told, is pretty versatile. "We can not only weave blankets and rugs with it, we can also use it as a cheap filler," said Meher Singh, whose family has a shoddy yarn unit.

"First, we give out a contract to unload the container," said he. These contracts range between Rs 15,000 and Rs 20,000 and are prized, he said, as the contractor gets to keep whatever he finds in the pockets of the old clothes. If nothing else, the contractor snips of the brass buttons to sell by weight, and all other items that can be reused like zips and hooks.

"We always get higher bids when there is a container from Korea," said he smiling, "We've recovered everything from money to gold chains in the pockets of Korean clothes!" American rags, he said, were nice because they were usually good quality. Italians were like Indians, said he, for they obviously checked all pockets before throwing out old clothes.

We walked into the unit to see the second step of the manufacturing of shoddy yarn. Over 50 women from the nearby village sat, sorting the rags into piles of different colours. The sun was beating down on our heads, but that was nothing compared to the heat that the mountain of woollens generated. Once the rags were sorted by colour, they were put through huge shredders, combed out and then spun with a few strands of synthetic thread. "Pure shoddy yarn is not very strong," said Meher Singh, showing me how easy it was to break a piece of yarn off, "The synthetic threads add strength to it," he said. The last step before the yarn was ready to be used was twisting - a huge machine twisted the yarn to make it smoother and stronger.

Even then, shoddy yarn has some limitations: It can't be dyed, which is why colour sorting of rags is so important. Also, its exact composition can't be easily gauged (in order to export shoddy yarn products on a large scale, the proportion of wool, cotton or synthetic fibre in the yarn has to be known). As a result, shoddy products aren't yet mainstream after having been around for over a decade, and after having warmed lakhs of India's poor in the form of the Rs 40 shoddy blanket.

Many people would dismiss shoddy yarn as being second hand and dirty. But when I look at shoddy, I see the near-magical transformation of torn rags into something of commercial value. Which is why I say, though its name suggests otherwise, there's indeed nothing shoddy at all about shoddy yarn.