Centre Makes Raw Cotton Import Duty-Free Till September 30 To Support Textile Sector

The Centre has temporarily scrapped the 11% duty on raw cotton imports until September 30, seeking to cool prices and ease cost pressures on the textile industry at a time when exporters face mounting tariff barriers abroad.

The exemption, effective August 19, removes both the 5% basic customs duty and the 5% agriculture infrastructure and development cess. A gazette notification issued late Monday said the waiver was being granted as a "necessary" step taken "in public interest."

Officials said the measure is aimed at stabilising raw cotton prices, reducing inflationary pressures on finished textile products, and protecting small and medium enterprises (SMEs) that are most vulnerable to price volatility.

The government also hopes this will strengthen the export competitiveness of Indian textiles, a sector that employs millions and contributes significantly to foreign exchange earnings.

The relief comes amid fresh headwinds in the US market, where Indian apparel exports will soon attract a steep 50% tariff, an existing 25% levy plus another 25% penalty tied to India's purchases of Russian oil.

By contrast, Bangladesh and Vietnam face a 20% duty and China 30%, putting Indian exporters at a disadvantage.

India's cotton imports have already risen sharply.

According to the Global Trade Research Initiative (GTRI), shipments more than doubled in the last financial year, climbing 107% to $1.2 billion from $579 million a year earlier. Since import taxes were imposed in 2022, the US share of India's cotton imports has fallen from 40-50% to a projected 19% in FY25, with mills shifting to cheaper Brazilian cotton.

Industry groups such as the Confederation of Indian Textile Industry (CITI) had lobbied for a waiver, warning that high input costs were undermining competitiveness against regional peers.

"The waiver will help mills facing high input costs and support yarn and fabric exporters ahead of the festive season. The relief is limited to 40 days to avoid sustained downward pressure on domestic cotton prices, which could hurt farmers," said Ajay Srivastava, founder of GTRI.