Govt exempts import duty on cotton for five months till October 30

New Delhi, May 30, 2026

The Centre has exempted cotton imports from customs duty and AIDC till October 31, aiming to improve domestic availability and lower raw material costs for textile manufacturers

In a bid to improve cotton availability for the domestic textile industry and lower input costs, the Union government on Saturday exempted cotton imports from customs duty and Agriculture Infrastructure and Development Cess (AIDC) for five months, effective June 1 through October 31, 2026.

The exemption, notified by the Ministry of Finance, applies to cotton classified under tariff heading 5201. Under the notification, imported cotton will be exempt from the entire customs duty as well as AIDC during the specified period.

A government official said the temporary relief is intended to augment cotton supplies for the Indian textile sector while balancing the interests of domestic cotton growers. The measure is expected to reduce raw material costs for textile and apparel manufacturers, particularly small and medium enterprises (SMEs), and improve the availability of cotton in the domestic market.

The move has been welcomed by industry associations. "Amid the ongoing global volatility and uncertainty, the 11% import duty on cotton was acting as a major hindrance to the Indian textile and apparel sector in raising its global competitiveness since our major Asian competitors already have duty-free access to cotton,” said Ashwin Chandran, chairman of the Confederation of Indian Textile Industry (CITI). "With this temporary relief in the cotton import duty, India’s textile and apparel exporters can better leverage opportunities that are emerging from the Free Trade Agreements (FTAs)," he added.

"Industry players have been seeking measures to address supply constraints and rising input costs, which have affected competitiveness in recent months. The duty waiver is expected to support textile production and exports by ensuring easier access to imported cotton during the peak demand period," said Anil Bharadwaj, secretary general of the Federation of Indian Micro and Small & Medium Enterprises (FISME).

Earlier, all major textile industry associations, too, had approached the Central government requesting the abolition of the import duty due to the surge in domestic cotton prices, caused by lower domestic production and the West Asia crisis.

Newly-elected Chief Minister of Tamil Nadu C Joseph Vijay, too, had approached the Prime Minister Narendra Modi to scrap the import duty to prevent job losses and protect the domestic textile industry in his state, one of the largest in the country.

The textile sector felt that the existing duty structure on raw cotton would increase their input costs, adversely impacting the competitiveness of domestic textile industry and affecting export commitments.

Industry and government sources said that a few weeks ago, most stakeholding ministries in the government including agriculture had come around to the view that removing the import duty on cotton for a limited period ( from June 1 to October 31) was unlikely to have any major impact on farmers, and that their interests would remain protected since the period in question is typically a lean one in cotton trade.

There is also the question of a shift towards blended fibres as raw materials for synthetic fibres enjoy duty exemptions while raw cotton remains subject to duty, which would lead to an uneconomical shift towards blends.

However, a section of the cotton trade contends that the key reason highlighted in various forums - that higher duty will hamper India's textile export competitiveness - is misleading. Those who want to export, this group points out, can import at zero duty under the Advance License Scheme (ALS).

They also argued that allowing duty-free cotton imports at this juncture could lead to forex outflow, as the last time India lowered the import duty on cotton, the total outflow was around $1.1 billion-$1.2 billion, while the amount of duty foregone was also substantial.

This group also pointed out that cutting duties at this juncture could be detrimental to farmers' interests just ahead of the kharif sowing season. It would also mean a loss for those growers holding on to their produce - estimated at around 4 million bales - in anticipation of better prices. One bale equals about 170 kg. Also, the Cotton Corporation of India (CCI) which was believed to hold around 4-5 million bales of cotton purchased through Minimum Support Price (MSP) operations, might suffer a loss if it has to liquidate its inventories at low prices.

“The last time, India lowered the import duty on cotton, farmers were forced to sell their produce at below MSP rates as a massive almost 3 million bales of cotton were imported in just three months while domestic demand was met through imports. A similar situation might happen again particularly for those growers who are holding on to their produce in hopes of better returns,” a senior trader said.

However, with cotton prices rallying in global markets due to various reasons, including the West Asia war; rates in the domestic markets have also surged by almost 10-15 per cent since the start of April.

The price increase has also been due to expectations in a lower-than-estimated crop in the 2025-26 crop year, which ends in September.

Sources said the domestic cotton industry now estimates, 2025-26 production to be closer 29.09 million bales, marginally down from 29.74 million bales of 2024-25.

[The Business Standard]