Context:
The Central Government of India has suspended the 11% import duty on cotton till September 30, 2025, responding to a sharp decline in domestic cotton production and rising concerns of the textile industry regarding raw material availability and cost competitiveness.
Key Highlights:
Government Decision & Policy Rationale
- The 11% import duty, imposed in February 2021, has been temporarily withdrawn.
- Objective:
- Ensure adequate cotton supply
- Provide a level playing field to the domestic textile sector
- Contain input cost inflation for yarn and fabric producers
Domestic Production Scenario
- Cotton production has declined to a 15-year low of 294 lakh bales.
- National demand stands at around 318 lakh bales, creating a supply gap.
- Estimated imports required: ~40 lakh bales.
Import Trends
- Cotton imports surged by 107.4% in FY 2024–25, touching $1.20 billion.
- Major supplier countries: Australia, United States, Brazil, Egypt.
Support to Farmers
- The Cotton Corporation of India (CCI) procured nearly 100 lakh bales at MSP,
- Expenditure: â‚ą37,500 crore.
- MSP for cotton increased by 8% for the 2025–26 season (starting October 1, 2025).
Industry & Farmer Concerns
- Textile Industry:
- Demands predictable duty policy, seasonal suspension (April–September), and 5% interest subvention on working capital.
- Cotton Farmers:
- Fear that cheaper imports may discourage domestic cultivation and affect price realisation.
Relevant Prelims Points:
- Issue: Suspension of cotton import duty amid production shortfall.
- Causes:
- Climate stress, pest attacks, rising input costs
- Declining acreage and productivity
- Government Measures:
- MSP procurement through CCI
- MSP hike for upcoming season
- Temporary trade liberalisation
- Benefits:
- Raw material availability
- Export competitiveness of textiles
- Challenges:
- Farmer discontent
- Long-term production sustainability
- Impact:
- Boost to textile value chain
- Possible pressure on domestic cotton prices
Relevant Mains Points:
- Key Concepts & Definitions:
- Minimum Support Price (MSP): Ensures minimum assured price to farmers
- Interest Subvention: Government support to reduce loan interest burden
- Cotton Bale: Standard trading unit (~170 kg in India)
- Institutions Involved:
- Ministry of Textiles
- Cotton Corporation of India (CCI)
- Linkages:
- Agriculture–Industry linkage
- Trade policy vs farmer welfare
- Way Forward:
- Improve cotton productivity through R&D and extension services
- Promote long-staple cotton varieties
- Balanced policy combining farmer protection and industry needs
- Transparent, time-bound import duty framework
UPSC Relevance (GS-wise):
- GS Paper II: Governance, Agricultural Policy
- GS Paper III: Economy, Agriculture, Industry, External Trade