Scrap cotton import duty and build strategic reserve, textile industry asks government

Falling domestic cotton production, rising minimum support prices (MSP) and import duties have pushed Indian cotton prices above international benchmarks, hurting the competitiveness of the country’s textile industry, according to a study released by the Confederation of Indian Textile Industry (CITI) on Thursday.

Among other recommendations, it called for the withdrawal of import duty on cotton, the creation of a strategic cotton reserve, and measures to improve productivity and price stability. It also suggested that the Cotton Corporation of India (CCI) be empowered to supply cotton to mills at internationally competitive prices.

The study, prepared jointly with Gherzi Textile Organisation (a Swiss consultancy and engineering firm) and the International Cotton Advisory Committee (ICAC), highlighted a shift in India’s cotton sector from a comfortable supply surplus to a tighter market, where domestic output can no longer fully meet the demands of the textile value chain.

India is the world’s second-largest cotton producer, with an output of 29.7 million bales in 2024-25. Cotton production for the 2025-26 season is projected at 29.1 million bales (1 bale equals 170 kg), while consumption is estimated at 32.8 million bales, resulting in a deficit of 3.7 million bales. Last season saw a similar shortfall, with consumption outstripping production by 2.5 million bales, the report said.

Indian domestic cotton prices have historically remained 3 to 5 US cents per pound (about 6.6 to 11 US cents per kg) lower than the international Cotlook A Index during the first half of the cotton season. However, the trend shifted after an import duty was imposed on cotton in 2021-22. Since April 2024, domestic cotton prices have remained above the Cotlook A Index, a global benchmark for cotton prices published in US cents per pound.

Competitive disadvantage

The report said the effective duty of around 11% made cotton imports costly for mills and contributed to higher domestic cotton prices during periods of tight supply. It added that competing textile-producing countries such as Bangladesh, Vietnam, Indonesia and Turkey allow duty-free imports of raw cotton, giving their textile industries access to internationally priced cotton.

It warned that if the current domestic-international price disparity continues, yarn exports could decline by 20-25%, resulting in an estimated annual loss of $0.5-1.2 billion in textile export earnings.

CITI noted that India’s cotton production has declined – from a peak of 37 million bales in 2017-18 to 29.1 million bales projected for 2025-26 – while domestic consumption has continued to rise. It also highlighted that India’s average cotton yield remains around 450 kg per hectare, lower than the global average of 833 kg per hectare.

India’s textile and clothing industry, valued around $180 billion, depends heavily on competitive cotton prices, the report noted. It also said India’s share in global cotton yarn exports declined from 38% in 2015 to 28% in 2024.

According to CITI, persistently high cotton prices have also affected investments in spinning capacity. Shipments of new ring spindles dropped to around 900,000 units in 2024 from more than 2 million units in both 2022 and 2023. It added that about 14-15 million ring spindles, representing nearly 25% of India’s installed spinning capacity, are currently idle.

Cotton mission

On Tuesday, the government approved a ₹5,659-crore Mission for Cotton Productivity (Kapas Kanti), seeking to raise yields, improve fibre quality, and reduce dependence on imports at a time when domestic demand is rising sharply. Union finance minister Nirmala Sitharaman had announced the launch of the mission in her Budget speech on 1 February 2025.

The five-year mission, spanning 2026-27 to 2030-31, will target nearly 3.2 million cotton farmers and focus on doubling productivity to about 755 kg per hectare and bring it closer to the global average.

The initiative also aims to expand cotton production to 49.8 million bales by 2030-31 from an estimated 29.7 million bales in 2024-25, as domestic demand is projected to reach 45 million bales over this period.