Rising pressure from the cotton industry may compel the Indian government to eliminate the 10 per cent import duty and an additional 10 per cent levy on cotton. Removing these duties is crucial for boosting textile exports, the industry argues, citing a current shortage of domestic cotton. However, this potential policy shift could have negative consequences for Indian cotton farmers, it adds.
If import duties are scrapped, the influx of cheaper imported cotton could force domestic growers to lower their prices. This price reduction would not only impact farmers' incomes but also affect the Cotton Corporation of India (CCI), the government agency responsible for purchasing cotton at the Minimum Support Price (MSP). The CCI currently holds about three-quarters of the 10 million bales it acquired this season.
Sources suggest, the Ministry of Textiles supports the removal of the import duty, and the CCI is also likely to concur. The yarn and fabric industries have been actively lobbying for this change, as they currently face an effective import duty of 11 per cent due to a 10 per cent basic customs duty and a 10 per cent levy.
Lalit Kumar Gupta, Chairman and Managing Director, CCI, points out, India annually imports 1 to 1.5 million bales of specific high-quality cotton not produced domestically, which is already exempt from customs duties. He stated, CCI would support the government's decision. While acknowledging potential losses from falling prices, he noted, CCI sells cotton throughout the year, sometimes securing better prices later. The government compensates the CCI for any losses incurred.
CCI is currently selling cotton at Rs 55,000–Rs 56,000 per candy (approximately 785 pounds). In the 2024–25 season, the CCI procured 10 million bales (about 375 pounds each), with roughly 25 per cent sold.
With the MSP-based cotton procurement season concluded, about two-thirds of the crop remains with farmers or has been sold to traders. Industry estimates suggest farmers hold 6–6.5 million bales. Removing the duty could allow imported cotton to land at Rs 48,000–Rs 50,000 per candy, undercutting domestic prices and potentially causing over Rs 20 billion in losses on unsold stock.
The Cotton Association of India (CAI) revised its 2024–25 cotton production estimate downward to 29.53 million bales in March 2025, projecting consumption at 31.3 million bales. The government's second advance estimate aligns closely, placing production at 29.42 million bales.
India's cotton production costs are about 1.5 times higher than in Brazil or Australia, enabling these countries to export cotton to India at lower prices. The yarn and fabric industry argues that expensive domestic cotton hinders the competitiveness of Indian textile exports. However, their existing option to import duty-free cotton under the advance licensing scheme weakens this argument.
Eliminating import duties now could discourage farmers at the start of the planting season, undermining the Cotton Mission aimed at boosting domestic production. Cheaper imports could harm farmers and derail government objectives, potentially leading to political protests in the approximately 220 Lok Sabha constituencies where cotton is grown.
