Mills Jittery as Duty-Free Cotton Window Closes
Textile mills in the country are worried over the lack of communication from the Centre on extending duty-free import of cotton, which ended on December 31, 2025. This will likely support prices in the domestic market.
The duty waiver, introduced in August and extended till December-end, was meant to augment supplies and ease pressure on textile units struggling with 50 per cent US tariffs.
K Venkatachalam, Chief Advisor, Tamil Nadu Spinning Mills Association (TASMA), said textile mills are concerned as cotton arrivals are at least 60 lakh bales (of 170 kg each) lower than last year, and the production this year is below 300 lakh bales. TASMA is among the organisations which sought extension of the duty-free facility.
Durai Palanisamy, Chairman of the Southern India Mills Association (SIMA), said as of now, it seems the duty-free regime has ended.
“We have asked for an extension of the facility. Cotton in transit may be affected. This season, the quality of cotton has been affected due to rain, while production is lower. The industry will be affected,” he said. With an upcoming free trade agreement and higher US tariffs, mills may be unable to stay competitive, though farmers will not be impacted, he said.
Price difference
Stating that there was a difference of over ₹10,000 a candy (356 kg) between the minimum support price (MSP) and market price, Palanisamy said export of yarns, made-ups and garments would suffer. “Even if the duty regime exists for a month, it takes several months to recover. We are finding it difficult to retain buyers,” he said.
Traders believe the discontinuation of duty exemption will support the domestic prices, which are ruling below the minimum support price levels. “The Cotton Corporation of India has purchased around 64-65 lakh bales till now. So the prices will hinge on CCI’s selling strategy,” said Ramanuj Das Boob, a sourcing agent in Raichur.
Anand Popat of Cotyarn Tradelink said about 70-80 per cent of the raw cotton arrivals is going to CCI, leaving limited supply in the private market with quality concerns likely to support prices. Also, the balance sheet for the current season is indicating that closing stock will be around 90 lakh bales. “Prices will depend on the selling policy of the CCI,” Popat said.
Atul Ganatra, former President, CAI, said around 32 lakh bales had arrived by the end of December. Another 4-5 lakh bales of long staple cotton and 3 lakh bales of Australian cotton, which are duty free, will come in the next 9 months, along with 4-5 lakh bales of African cotton at 5.5 per cent duty.
“Mills doing exports can buy against open licence and will face only 4 per cent duty. Brazilian cotton is available at ₹50,000 per candy (356 kg) port delivery. So if the Indian prices go up, then mills will have options to buy Brazilian cotton,” he said.
The Cabinet is inclined to extend the duty waiver and the Ministry of Textiles has backed it, but the Agriculture Ministry has to concur, a source said.
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