The Indian government has extended the exemption on cotton import duty by two months until December 31, 2026, to ensure adequate availability of raw material for the domestic textile and apparel industry and reduce production costs. The exemption, which was earlier scheduled to expire on October 31, will now allow duty-free cotton imports for another two months.
The Ministry of Finance issued a notification on October 30, extending the exemption by amending its notification dated May 30, 2026. The decision is expected to provide relief to textile mills by ensuring a steady supply of cotton at competitive prices.
However, continuing duty-free imports during the arrival of the new domestic cotton crop could adversely affect farmers' interests by putting downward pressure on domestic cotton prices.
Rural Voice reported on October 27 that the exemption on cotton import duty was likely to be extended until December 31.
11% Import Duty Exemption Extended
The government first announced a temporary exemption from customs duty on cotton imports on May 30, 2026. The exemption was effective from June 1 to October 31, 2026, and covered the 11% customs duty levied on cotton imports.
With the latest notification, the exemption will remain in force until December 31, 2026. The extension is intended to help textile manufacturers manage raw material costs and maintain their competitiveness.
Concerns Over Declining Domestic Cotton Production
The decision comes amid growing concerns over India's domestic cotton production in the 2026–27 season. According to trade estimates, cotton production could fall below 29 million bales, while domestic consumption is expected to exceed 34 million bales.
Concerns over weak monsoon rainfall, pest attacks and lower crop yields have raised questions about domestic cotton availability. Rainfall deficiencies in parts of Maharashtra and Karnataka could also affect cotton production.
Cotton prices generally tend to ease with the arrival of the new crop from October. However, prices have remained elevated this season, reflecting concerns over production and supply.
Domestic cotton prices are trading above Rs. 9,000 per quintal, compared with the minimum support price (MSP) of Rs. 8,267 per quintal for medium-staple cotton and Rs. 8,667 per quintal for long-staple cotton for the 2026–27 season.
Cotton Imports Rise 63%
According to Commerce Ministry data, India's cotton imports increased by 63% year-on-year to USD 1.1 billion during the first six months of the current financial year.
The extension of the duty exemption is expected to encourage further imports from countries such as the US, Brazil and Australia.
However, high international cotton prices, freight costs and the depreciation of the Indian rupee could make imported cotton more expensive, limiting the cost benefits for domestic textile manufacturers.
Farmers Face Price Risks
The extension of the import duty exemption is expected to improve raw material availability for textile mills and help contain their production costs. However, the continuation of duty-free imports during the domestic harvesting season has raised concerns about its potential impact on cotton farmers.
Increased imports could intensify competition for domestically produced cotton and exert downward pressure on market prices, potentially affecting farmers' realisations.
The government faces the challenge of balancing the textile industry's demand for affordable raw material with the interests of domestic cotton growers, particularly at a time when concerns over production and farm-level returns remain significant.