Import duty on cotton needs to be withdrawn to allow Indian mills to access cotton at competitive prices and gain a level playing field with competitors in other Asian economies that have duty free access to international cotton, per a latest industry study on India’s cotton sector.
“A stable and predictable policy is imperative to allow the mills to sustain their operations and fulfil the market demand. There is a need to withdraw import duty on cotton and allow the mills to have access to cotton at competitive prices,” the study released by the Confederation of Indian Textile Industry noted.
The report jointly, prepared by consulting company Gherzi and the International Cotton Advisory Committee (ICAC), noted that India’s competitors in Asia have free access to international cotton without any import duty. “The import duty put India at a significant disadvantage,” it said.
Exports from the textile and apparel sector, India’s second-biggest employer, declined 2.2 per cent in dollar terms year-on-year in FY26 to $35.79 billion.
Ministries differ on subject
The Textile Ministry has been pushing for the removal of import duty of 11 per cent on raw cotton, which was reinstated this year, to boost garments production and exports. But the Agriculture Ministry has withheld its consent and is carrying out stakeholder consultations with industry as well as farm groups on the matter to ensure farmers are not hit.
The Textile Ministry further suggested that the removal of import duty could be temporary, covering the lean season for domestic cotton. The matter is being discussed at the moment by the Ministries of Textiles, Finance and Agriculture.
The Gherzi-ICAC report also proposed setting up of an institutional mechanism to stabilise cotton prices to reduce the impact of price speculation on the value chain. “A Cotton Price Stabilisation Fund scheme with 5 per cent interest subvention may be considered to mitigate working capital during peak season, for cotton procured during November–March,” it said.
Cotton reserve
Inspired by the cotton reserve policy adopted by other major cotton-textile producing countries, such as China, the report further suggested that the Cotton Corporation of India could maintain a strategic inventory of about three months of consumption to be used to cushion volatility. “There would also be a need for CCI to sustain a dynamic selling policy to meet the current requirement of the mills through its warehouses in upcountry locations near major textile clusters,” it added.
For improving productivity, the report proposed that long-term policy considerations should address the fundamental constraints faced by the cotton sector for improving productivity to ensure economic viability of cotton for the growers. “Policy framework for an industrial crop such as cotton, will need to take into account the interests of the entire value chain,” it noted.
Published on May 7, 2026