India set to extend duty-free cotton imports

Stacks of cotton bales in a warehouse illustrating India’s extended duty-free cotton imports and higher import bill

Key Points

01India is expected to extend its 11% cotton import duty waiver through December
02The extension would follow a duty-free window from June 1 to October 31
03Domestic output is seen below 29m bales versus demand above 34m bales in 2026-27
04India’s cotton import bill rose 63% YoY to $1.1bn in the fiscal year’s first half

India poised to prolong duty-free cotton imports

India is expected to extend the exemption from the 11% customs duty on cotton imports until the end of December, lengthening a duty-free window that began on June 1 and is currently due to expire on October 31. The planned two-month extension is aimed at easing supply shortages, moderating domestic cotton prices and reducing raw material costs for textile mills.

Government and industry sources said an order extending the duty waiver at least until the end of December is expected after inter-ministerial consultations are completed.

Tight domestic balance underpins policy move

The prospective extension comes against a backdrop of tight domestic cotton supplies. For the 2026-27 season, India’s cotton output is estimated at below 29 million bales, while demand is seen exceeding 34 million bales, pointing to a significant supply gap. The stock-to-use ratio is around 31%, its lowest level in five years, reflecting lean inventories.

Domestic cotton prices, which typically ease when new-season arrivals start in October, have stayed firm this year amid lower crop prospects following patchy monsoon rains. Prices are above 9,000 rupees per 100 kg, higher than the government-set floor price of 8,717 rupees for the new season, reinforcing pressure on spinning mills’ margins.

Impact on mills, farmers and trade flows

The continued duty-free window is expected to help textile mills by cutting import costs and offering an alternative to expensive domestic fibre. Analysts say additional imports could help curb local prices, even as they support global cotton prices by tightening exportable supplies from key origins.

India’s cotton imports have already risen sharply, with the import bill up 63% year-on-year to $1.1 billion during the first six months of the current fiscal year from April. Higher benchmark US cotton futures, above 83 cents per pound, along with elevated freight costs and a weaker rupee, could still limit the scale of additional buying even if the waiver is prolonged.

Industry calls and structural challenges

Industry representatives argue that import taxes have increased manufacturers’ production costs and have urged that the duty be removed for a longer period to help the textile sector compete with producers in countries such as Vietnam and Bangladesh. The expected extension to December is seen as providing at least a short-term reduction in input costs.

At the farm level, structural issues continue to weigh on yields. Many growers are using older generations of genetically modified cotton seeds, leaving crops more vulnerable to pests and reducing productivity. These factors, combined with weather-related setbacks, contribute to the lower output that is driving the need for extended duty-free imports.

Key Takeaways

01The anticipated extension of India’s cotton import duty waiver to December is a direct response to a sizable domestic supply shortfall and firm local prices.
02A low stock-to-use ratio and output below projected demand underline that domestic production alone is insufficient to balance the 2026-27 cotton market.
03Textile mills stand to benefit from lower raw material costs and improved access to imported fibre, even as high global prices and logistics costs temper the scale of extra imports.

References