Pune: India’s textile industry has suggested that the government could offer to remove the 11% duty on raw cotton imports and use it as a tool to negotiate favourable terms for the country’s textile and garment sectors during bilateral trade discussions with the US.
ET had reported earlier citing officials that New Delhi could consider lowering or completely eliminating import levies on American walnuts, almonds, apples and cranberries while seeking to forge trade ties with Washington.
The textile industry needs high-quality, contamination-free cotton, which meets global compliances as raw material for export-quality garments. Removing the importer duty can not only be a good negotiation tool but will also help make exports more competitive by reducing the cost on cotton imports, said industry leaders.
India imposed import duty on cotton in February 2022. The share of the US in India’s cotton imports has since reduced to an estimated 19% in fiscal 2024-25 from 40-50%. As duties made imported cotton expensive, India’s textile industry had shifted to relatively cheaper Brazilian cotton to compete with Bangladesh and Vietnam, which had access to cheaper US cotton.
“We have lost a lot of export of value-added cotton textile and garments,” said K Selvaraju, secretary-general of the Southern India Mills Association.
The Ministry of Textiles has a target to expand India’s textile industry to $350 billion by 2030, including exports of $100 billion. The current market size is $180 billion.
However, the industry has been facing an acute shortage of cotton, which is expected to aggravate this year as production in the 2024-25 crop year is expected to be the lowest after 2008-09.
The country is also likely to have a historically lowest stock at 3 million bales (each weighing 170 kg), which is equivalent to one month’s consumption. Typically, the stock lasts for a month and a half to two months.
“As a result of the import duty on cotton, domestic cotton prices have consistently been higher than the global prices, impacting the competitiveness of the entire value chain,” said Chandrima Chatterjee, secretary general of the Confederation of Indian Textile Industry (CITI).
Domestic traders are offering cotton by adding the import duty equivalent of 11% to the prevailing cotton prices, the CITI had informed the government in a letter.
“If we remove the import duty on cotton, it can be used as a negotiation tool during the bilateral trade agreement discussions,” said Chatterjee.
The user industry has reported that the Cotton Corporation of India, which procures cotton at the minimum support price from farmers, is also adding import duty equivalent to the price when it sells the fibre. It thus makes domestic cotton expensive compared with international prices.
