The story thus far: Cotton, which is the principal uncooked materials for the textile business, is grown by practically six million farmers in India. In the wake of declining manufacturing, the Central authorities has withdrawn the 11% import duty it launched in February 2021. However, the final yr noticed a steep improve in cotton imports, even with the duty in place. On August 18, the authorities mentioned it’s withdrawing the duty until September 30 when the present cotton season will finish.
Why was the duty launched?
The import duty was introduced by Union Finance Minister Nirmala Sitharaman in the 2021 Budget, when the nation was producing 350 lakh bales of cotton yearly in opposition to the requirement of 335 lakh bales. While the nation was exporting cotton, there have been imports too and the duty was aimed toward defending the curiosity of cotton growers.
In a transfer to deal with the uncooked materials (cotton) scarcity confronted by the textile business, the authorities exempted all types of cotton from import duty from April 14, 2022 to September 30, 2022, later extending the exemption till October 31, 2022. According to the Global Trade Research Initiative, cotton imports surged 107.4%, rising from $579.2 million in FY2023-2024 to $1.20 billion in FY2024-2025.
What is the present scenario?
The general home cotton manufacturing is all the way down to 294 lakh bales, the lowest in the final 15 years, in opposition to the requirement of 318 lakh bales (together with non-mill use). Cotton manufacturing in the 2024-2025 cotton season (October to September) is estimated to be practically 20 lakh bales lesser than the final cotton season. Imports are additionally more likely to be highest at about 40 lakh bales, with main provides coming from Australia ($258.2 million), the U.S. ($234.1 million), Brazil ($180.8 million), and Egypt ($116.3 million). The Cotton Corporation of India bought practically 100 lakh bales of cotton from farmers at Minimum Support Price (MSP) throughout the ongoing cotton season spending ₹37,500 crore, and has bought 73 lakh bales in the market. For the 2025-2026 cotton season that can begin on October 1, the authorities has hiked the MSP by 8%. Farmers in the north are anticipated to start out bringing cotton to the market in October and people in central and western States are more likely to begin supplying after Deepavali.
What does the withdrawal suggest?
It is alleged that solely about two lakh bales of imported cotton which are in transit might be obtainable with out the duty as it should attain Indian shores by September 30. Several worldwide manufacturers are highlighting that cotton suppliers and garment producers want to make use of cotton from these suppliers. When garment exporters compete in the worldwide market, the uncooked materials value was larger due to the duty. They could have a level-playing subject with out the duty.
However, cotton farmers usually are not in full settlement with these views. According to Ravichandran, who cultivates cotton at Thiruvarur in Tamil Nadu, the elimination of the duty discourages farmers from cultivating cotton. The elimination of the import duty won’t assist cotton farmers who don’t get any help from the authorities, mentioned Kurubur Shanthakumar, south India convenor of Samyukta Kisan Morcha.
What is the long-term answer?
The business is two main help measures from the authorities — it desires a steady coverage in order that the business can plan for uncooked materials procurement. The authorities ought to droop the duty yearly throughout the non-peak season (April to September) as the farmers would have bought majority of the produce by then.
It additionally desires 5% curiosity subvention for working capital that textile mills must buy cotton throughout the peak season. If the mills, particularly MSME models, have satisfactory funds, they’ll cowl the required cotton and authorities needn’t spend on MSP operations, says business.
