Government Removes Cotton Import Duty Ahead of New Harvest, A Shock for Farmers

The Government of India has removed the import duty on cotton, just weeks before the new crop enters the market, in a move that could significantly reshape the cotton trade landscape. A notification from the Finance Ministry, issued late on August 18, announced that cotton imports will be exempt from customs duties from August 19 until September 30, 2025. Previously, cotton was subject to a 10% customs duty and a further 10% agriculture infrastructure cess, resulting in an effective rate of 11%. This exemption comes into effect immediately.

This policy shift is expected to impact domestic cotton prices, potentially disadvantaging farmers who may struggle to secure competitive prices in the upcoming marketing season. Additionally, the Cotton Corporation of India (CCI), which purchases cotton at the government-mandated minimum support price (MSP), is likely to see a drop in prices as a direct consequence of this decision. Currently, the CCI is selling cotton in the market at rates ranging from ₹56,000 to ₹57,000 per candy (355.6kg), whereas imported cotton is estimated to cost between ₹50,000 and ₹51,000 per candy.

Sources indicate that until a week ago, some officials in the Textile Ministry opposed the removal of the import duty. However, in a swift reversal, the Finance Ministry issued the decisive notification on August 18. Notably, the CCI, which both procures cotton at MSP and supplies the market, has also endorsed the removal of the import duty.

The government’s notification grants a 40-day window—from August 19 to September 30, 2025—for duty-free cotton imports. Industry experts suggest that during this brief period, only cotton currently in transit or available in importres pre customs clearance warehouses. Such quantity is around 600,000 bales (approximately 100,000 tonnes) in the international market.

With the abolition of the import duty, the government stands to forego about ₹170 crore in revenue. Furthermore, considering the unsold stocks held by CCI, the organisation could face losses of up to ₹700 crore, stemming from an anticipated ₹5,000 drop in market prices per candy, as imported cotton is set to be priced near ₹51,000 per candy.

This decline in prices will likely persist into the next season, exerting downward pressure on the market as it opens at reduced rates. For the upcoming marketing season, CCI’s cost for cotton purchased at MSP is projected to be about ₹61,000 per candy. Meanwhile, domestic traders holding existing stocks will also confront losses from lower market prices, potentially amounting to ₹100 crore. In this scenario, the textile industry—alongside multinational corporations exporting cotton to India—will be among the primary beneficiaries of the government’s decision to waive duties on cotton imports.