The Hindu: Published on 27 August 2025.
Why in News?
The Central Government has suspended the 11% import duty on cotton (till September 30, 2025).
The decision comes amid falling domestic cotton production and rising demand from the textile industry.
Cotton production in 2024–25 is estimated at 294 lakh bales, the lowest in 15 years, against a requirement of 318 lakh bales.
Imports are expected to hit 40 lakh bales, with major supplies coming from Australia, U.S., Brazil, and Egypt.
Background:
Cotton is a key raw material for India’s textile industry, grown by about six million farmers.
In February 2021, Finance Minister Nirmala Sitharaman introduced an 11% import duty to protect farmers when production exceeded domestic demand.
Later, due to textile industry shortages, the government temporarily removed import duty (April–October 2022).
Why was the duty introduced?
To protect domestic cotton growers when India was producing more than the domestic requirement (350 lakh bales vs 335 lakh bales demand in 2021).
Despite surplus production, India was importing cotton. The duty was meant to discourage imports and stabilize farmer income.
Current Situation:
Cotton production has dropped drastically (294 lakh bales vs requirement of 318 lakh bales).
Cotton imports surged 107.4% in FY24–25, reaching $1.20 billion.
Cotton Corporation of India (CCI) purchased 100 lakh bales at MSP, spending ₹37,500 crore, but has sold 73 lakh bales already.
The government has raised MSP by 8% for the 2025–26 season.
Implications of Withdrawal:
For textile industry: Cheaper cotton imports → reduced raw material costs → better competitiveness in international markets.
For international trade: Global suppliers (Australia, U.S., Brazil, Egypt) gain market share.
For farmers:
Many believe this discourages farmers from cultivating cotton in the long run.
They feel import duty removal benefits the textile industry more than farmers.
Farmer leaders argue that government support (other than MSP) is lacking.
Industry Perspective:
Textile industry demands:
Stable policy on import duty – suggest suspension during non-peak season (April–September) when farmers have already sold most produce.
5% interest subvention on working capital – so mills (especially MSMEs) can stock cotton during peak season instead of depending on government MSP operations.
Long-Term Challenges & Solutions:
Challenge: Declining cotton production due to crop failures, lower acreage, climate variations.
Solution:
- Provide policy stability (not frequent changes in duty).
- Encourage research in high-yield, pest-resistant cotton varieties.
- Offer financial support to farmers beyond MSP.
- Improve irrigation, extension services, and crop insurance.
- Balance interests of both farmers and textile industry to maintain sustainability.
In Summary:
The suspension of cotton import duty is a short-term measure to help the textile industry tackle raw material shortages and remain globally competitive. However, farmers fear it will discourage domestic cotton cultivation. A long-term solution lies in stable policies, farmer support, and reforms in cotton production and procurement.
