Indian textile industry seeks duty-free cotton in Budget 2026-27
India’s textile and apparel industry has highlighted concerns over the security of raw material availability at global quality standards and competitive prices in its wish list ahead of the Union Budget 2026–27. The budget will be presented by Finance Minister Nirmala Sitharaman on February 01, 2026, in Parliament.
The Southern India Mills Association (SIMA) has demanded duty-free cotton imports without any time rider. It has also urged a separate classification for recycled and sustainable textile products, import duty exemptions for speciality fibres, and the removal of anti-dumping duties on key inputs such as PTA and MEG.
SIMA said in its representation that cotton productivity has slipped sharply in recent seasons, cutting output well below industry demand and leaving mills exposed to supply gaps from late 2025 onwards. Industry estimates indicate that retaining import duties would restrict cotton inflows and worsen shortages, while a permanent duty-free regime would allow higher imports, stabilise prices, and support a significant rise in textile exports and employment. With competing countries holding far larger stocks, Indian mills risk losing orders to rivals such as Bangladesh, Vietnam and Cambodia if fibre supply remains uncertain.
The industry body has also sought the removal of import duty on cotton waste, which is widely used by handloom and power loom clusters in centres such as Karur, Erode, Salem and Madurai to produce towels, kitchen linen, carpets and furnishing fabrics. The levy is hurting the competitiveness of Indian exporters against Pakistan in recycled and waste-based home textile products and has pushed many open-end spinning units into financial stress.
In the man-made fibre segment, manufacturers have called for a separate classification for recycled and sustainable textile products to enable international buyers to identify them easily. They have also urged the government to remove anti-dumping duties on key inputs such as PTA and MEG, and to grant import duty exemptions for speciality fibres not produced in India, to help the industry move into technical textiles and higher-value exports.
MSME textile units have sought compliance relief by aligning audit and company secretary requirements with the revised MSME definition, and banking support to ensure smooth discounting of export bills, especially for shipments to Bangladesh, which remains a major market for Indian cotton yarn and fabrics. They have warned that any disruption in export finance could quickly squeeze working capital for small manufacturers.
To reduce logistics costs and emissions, exporters have proposed allowing trucks delivering import cargo to carry export consignments on their return journey, particularly along routes linking ports with textile hubs such as Tiruppur, Erode and Karur. This would help cut empty runs, lower freight costs and improve turnaround times for MSME exporters.
The industry has also pushed for the fast-tracking of pending technology upgradation subsidies, the continuous operation of export incentive schemes in cash form, and the extension of interest-subvention support to cotton yarn exports. With cotton yarn seen as a major growth driver towards India’s long-term textile export targets, manufacturers say stronger credit support is essential to sustain investment and job creation.
Finally, the sector has urged stronger measures to curb under-invoiced imports of garments and made-ups through fabric- or yarn-forward rules, along with a broader credit-guarantee framework and interest support to prevent textile manufacturing from turning into a stressed sector as global competition intensifies.
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