Duty-Free Cotton Imports to Ease Raw Material Costs for Textile Industry
The Indian textile industry is expected to benefit from the temporary exemption of customs duties on raw cotton imports, a move aimed at improving cotton availability, reducing input costs and enhancing the sector’s global competitiveness.
The Ministry of Finance, through a notification issued on May 30, 2026, exempted imports of raw cotton from customs duties and cess for the period June 1 to October 31, 2026.
Under the notification, manufacturers are exempt from the 5% Basic Customs Duty, 5% Agriculture Infrastructure and Development Cess (AIDC), and the applicable Social Welfare Surcharge, resulting in an effective duty relief of 11% on imported raw cotton.
The temporary measure has been introduced to address supply constraints and rising raw material costs faced by the domestic textile industry.
India’s textile sector is witnessing growing export opportunities while simultaneously facing challenges arising from limited domestic cotton availability and higher cotton prices. The duty exemption is expected to provide manufacturers with access to competitively priced, quality cotton from international markets, helping lower production costs and strengthen export competitiveness.
Cotton remains one of the most important raw materials for the industry, accounting for approximately 65% of yarn production costs and 25–30% of the manufacturing cost of apparel and home textiles. Stable cotton prices are particularly important for exporters working under long-term contracts and buyer-nominated supply arrangements, where fluctuations in raw material costs can significantly affect profitability and delivery commitments.
The industry is currently facing a cotton supply gap, with domestic production estimated at around 290 lakh bales, against an annual requirement of 330–350 lakh bales, resulting in a shortfall of 40–50 lakh bales.
Although India accounts for nearly 38% of the world’s cotton cultivation area, it contributes only around 19% of global cotton production, primarily due to lower productivity levels.
Industry stakeholders believe the temporary duty exemption will improve the availability of cotton, support textile manufacturers—particularly small and medium enterprises—and help the sector remain competitive in global markets during the exemption period.
