With the Budget for 2026–27 drawing closer, the Centre is caught between competing demands from farm associations and the textile industry over import duty on cotton, even though an immediate reduction or removal of the levy appears unlikely.
Textile manufacturers are pushing for the removal of the import duty on cotton, reinstated from January, citing falling domestic production and quality constraints that are hurting competitiveness.
Farm organisations are opposed to any such move, pointing to a sharp decline in cotton prices and the impact on farmer incomes.
The import duty on cotton is around 11 percent, including basic customs duty, the Agriculture Infrastructure and Development Cess, and surcharges.
Sources said the government has received representations from both sides but the prevailing weakness in cotton prices, which have fallen from roughly Rs 57,000 to about Rs 52,500 per candy, has made policymakers wary of easing import curbs.
“The government has received representations from farm associations opposing any reduction or removal of the import duty on cotton. Cotton prices have fallen and farmer incomes have been impacted, so it is unlikely that the duty will be reduced,” a government source said.
Drop production a growing concern
Cotton duty was first introduced in February 2021 to protect farmers and discourage cheaper overseas imports.
Cotton production supports an estimated 6 million farmers and around 40–50 million people engaged in processing and related activities, according to the textiles ministry.
Duty has been exempted a few times, the latest was valid until December 31.
Earlier this month, a delegation from the Confederation of Indian Textile Industry (CITI) met agriculture minister Shivraj Singh Chouhan, urging the government to permanently remove the 11 percent import duty on cotton.
The delegates said cotton production has been steadily declining and is projected to fall this year to its lowest in two decades, heightening concerns about supply shortages. They said the reimposition of the import duty would further aggravate cost pressures for companies.
During the past decade, average cotton imports have been around 20 lakh bales, constituting about 6.8 percent of India’s average domestic production.
CITI said these imports are largely driven by quality and specification requirements, catering to specialised cotton needs and back-to-back export orders, and do not displace domestic cotton.
“The industry fully supports the government’s objective of protecting farmers’ interests, which are already effectively safeguarded through the Minimum Support Price (MSP) mechanism. The MSP for cotton has been increased by about 8 percent in the current season and is currently above prevailing market prices, ensuring a strong safety net for farmers, even as the industry grapples with rising input costs and severe external trade headwinds,” CITI added in a statement.
India’s textile and apparel sector, one of the biggest employers in the country, directly provides jobs to over 45 million people and supports more than 100 million livelihoods indirectly, including rural workers and women, the textiles ministry 2024–25 annual report said.
The sector also contributes significantly to exports, with the United States alone taking nearly 28 percent of India’s textile exports, valued at about $11 billion in 2024–25.
The sector has been under additional pressure since mid-2025 after US slapped a 50 percent tariff on Indian goods.
According to latest official data, exports of textiles and apparel in December 2025 grew only 0.4 percent on-year, while during April–December 2025, shipments of textiles fell 2.2 percent year-on-year and apparels grew 2.4 percent over the same period.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
