Persistent demands from the textile and apparel sector for import duty exemption on cotton have paid off. The government has granted a five month exemption from June-October this year. In its representations to the government industry leaders and those in the apex bodies such as AEPC, SIMA and others had expressed fears that the sky–rocketing cotton and yarn prices in the past 60 days would push the industry into a fresh crisis leading to a cotton shortage, loss of export orders, besides an increase in the prices of domestic apparel products.
The exemption however falls short of the recommendation of the office of the Textile Commissioner which wanted a six month duty exemption during April – September every year for five years to resolve the crisis.
A finance ministry notification says the move aims to cool down prices and ensure that the domestic garment and textile industry remains in a “robust” state “The temporary duty exemption is expected to reduce input costs across. The textile and apparel sector, providing targeted relief to factories and consumers while also keeping the interest of domestic farmers in mind. Overall, the measures to anticipated to have a positive impact on the performance of the textile industry especially the small and medium scale enterprises ensuring better availability of cotton in the market the notification adds.
The measure implemented during the cotton off season will ensure adequate availability of cotton for the textile industry, supports MSMES, moderate input costs and strengthen the competitiveness of Indian textiles while safeguarding farmers interest and ensuring market stability, the textile ministry said.
“This will lead to a reduction of input costs across the textile and apparel sector providing relief to MEMES in the downstream industry, which have been facing challenges due to the sharp increase to cotton and yarn prices, says apparel Export Promotion Council Secretary – General, Mithileswar Thakur.
According to the industry, domestic cotton prices have sky rocketed during the last 60 days because of the import duty. Yarn prices too have also gone up by about Rs.41 kg. Cotton prices has been rising rapidly since January this year. “Cotton Corporation of India (CCI) has increased the price from Rs.54, 700 per candy to Rs.68,100 per candy (355 kg) in the last two months. The market price of Gujarat – based Shanker – 6 cotton that prevailed at Rs.54,800 per candy in March 2026 rose to Rs.66,500 per candy, now up by 22 percent, industry leader said.
Apart from the import duty what had further led to the steep increase in prices was the role played by traders who generally influence the market situation to them advantage.
CCI had procured over 35 percent of the cotton crop under the minimum support price (MSS) scheme and sold 66 lakh bales so far. Earlier, the industry had the option of importing cotton and maintain stability in yarn prices during the offseason (July – September). This option is not available now due to 11 percent import duty.
The predominantly cotton based Indian Textile and Clothing industry has often faced challenges owing to the volatility in cotton prices that account for 60 percent of the yarn cost for the spinning industry. The West Asia war has exacerbated the crisis situation leading to market disruptions, cost escalations and increased uncertainly in export demand.
The limited cotton availability has been affecting the downstream exporting sectors, garments and made-ups segments, finding it difficult to meet their export commitments. In this situation, the steep increase in cotton prices has further deestablished the industry and is making our exports uncompetitive.
The sharp increase in cotton prices well not only adversely affect the industry and squeeze margins but will also lead to higher prices in apparel and textile products for our domestic consumers, already burdened from the fall out of the Middle East crisis.
At its meeting on April 16, the committee on cotton production and consumption had estimated consumption at 328 lakh bales and closing stock at 43 lakhs bales for the current cotton season.
It is essential therefore to with draw the duty immediately to change the market sentiments and avoid damage to the cotton textile value chain. The industry imports 11 to 12 lakh bales of cotton hurriedly – less than 4 percent of annual consumption – that too of cotton varieties not grown in the country. That duty does not help cotton farmers and is a big hindrance to the industry.
Exporting units of various sizes and others had demand duty exemption till December this year amid a sharp rise in cotton prices and a weakening rupee. Manufacturing units complain that the price hike pushes up costs, rendering them uncompetitive in the global market.
“Many compacting Asian countries such as Bangladesh and Vietnam have zero duty access. A sustained domestic supply gap and higher prices force Indian textile manufacturers and exporters to battle higher import costs at a time of getting orders from key markets. “Same of units cannot accept orders with certainty” says Dr.A.Sakthivel AEPC Vice Chairman.
Domestic cotton production is projected to fall to 291 lakh bales against the consumption demand of 328 lakh bales leaving a gap of 37 lakh bales, this season Confederation of India Textile Industry (CITI) notes.
Sakthivel further says the FTA agreement with New Zealand opens up enormous opportunities for Indian exporters to expand their presence in categories like cotton T-Shirts, Knitwear and other garments. AEPC notes that the “FTA aligns with India’s strengths in cotton based apparel and offers scope for diversification into man-made fibre segments to match New Zealand demands and trends”
Tirupur Exporters Association hails the FTA as a milestone for the Indian Textile sector. TEA President K.M.Subramanian says the deal is expected to attract investments worth dollar 20 billion into India and strengthen longterm economic co-operation between the two countries.
Source: Ministry of Commerce
