Cotton Imports Get Duty-Free Entry: Here's Why It Matters

The Centre has exempted cotton imports from customs duty for a period of five months beginning June 1, providing relief to India's textile and apparel industry at a time when exporters are facing increasing global competition and supply-side challenges.

The decision marks the second such temporary duty waiver by the government and is intended to ensure that domestic textile manufacturers have access to competitively priced raw material.

Industry stakeholders have long argued that higher domestic cotton prices and limited availability of premium-quality fibre have weakened India's export competitiveness, particularly against textile-producing nations such as Bangladesh, Vietnam, and Pakistan.

The move comes as India's textile and apparel exports remain under pressure. According to official data, exports declined by 2.2% in FY26 to around $35.7 billion from $36.6 billion in the previous fiscal year, highlighting the challenges facing one of the country's largest employment-generating sectors.

What Duty Has Been Waived?

Before the exemption, raw cotton imports attracted an effective customs duty of 10.5%, comprising 5% Basic Customs Duty (BCD) , 5% Agriculture Infrastructure and Development Cess (AIDC) and 0.5% Social Welfare Surcharge

By temporarily removing these duties, the government aims to reduce input costs for spinning mills, textile manufacturers, and exporters that rely on imported cotton.

The waiver is expected to make imported cotton more affordable and help domestic manufacturers compete more effectively in international markets.

Why Does India Import Cotton?

India is one of the world's largest cotton producers and consumers. However, quantity alone does not address the needs of the textile industry.

A significant portion of India's premium textile and garment exports require extra-long staple (ELS) cotton, a superior-quality fibre used in producing finer yarns, luxury fabrics, and high-end apparel.

Domestic production of ELS cotton remains insufficient to meet industry demand, forcing manufacturers to rely on imports from countries such as the US, Brazil, and Australia.

At the same time, domestic cotton prices are often higher than international prices due to the government's Minimum Support Price (MSP) mechanism, which protects farmer incomes.

While MSP support benefits cultivators, it can increase costs for textile mills and exporters, making Indian products less competitive globally.

In recent years, additional challenges such as lower crop yields, pest infestations, erratic weather patterns, and concerns over fibre quality have further constrained domestic supply.

Short-Term Relief vs Long-Term Goals

The duty exemption comes a month after the Union Cabinet approved the ₹5,659-crore Cotton Productivity Mission, also known as Kapas Kanti, which aims to revive and strengthen India's cotton sector over the next five years.

The mission will be implemented between 2026-27 and 2030-31 and seeks to address structural challenges affecting cotton production, including stagnant yields, quality concerns, and declining acreage.

The programme aligns with the government's broader "5F" vision—Farm to Fibre to Factory to Fashion to Foreign—which aims to create an integrated textile value chain while boosting exports.

Key objectives of the mission include, developing high-yielding, pest-resistant cotton seed varieties, promoting advanced cultivation techniques, improving fibre quality and reducing contamination and enhancing India's competitiveness in global cotton and textile markets

Why the Waiver is Significant

The duty waiver comes at a critical juncture for India's textile industry.

Global demand conditions remain uncertain, while competition from other textile-exporting nations has intensified. Indian manufacturers are also seeking to capitalise on opportunities arising from recently signed and proposed free trade agreements that could expand market access for textiles and garments.

Industry experts have repeatedly argued that higher cotton costs reduce export margins and weaken India's ability to compete internationally.

The exemption is therefore expected to improve the cost structure for textile mills in the near term and support export-oriented manufacturing.

What Does It Mean for Cotton Farmers?

While the waiver is likely to be welcomed by textile manufacturers, it may raise concerns among cotton growers, a report by Mint said.

The exemption coincides with the beginning of the cotton sowing season, and increased imports could put downward pressure on domestic cotton prices if global supplies become significantly cheaper.

Some farmer groups may worry that lower prices could discourage cotton cultivation at a time when acreage has already been under pressure in several regions, the report added.