Preparations underway to remove import duty on cotton, farmers may suffer losses due to fall in prices
2025-04-29 11:00:11
Cotton Import Duty Cut May Hurt Farmers with Price Drop
The Government of India may abolish the 10 percent import duty and 10 percent cess on cotton. The reason is the pressure of the cotton industry! In view of the shortage of cotton in the country, the cotton industry is trying to get the import duty on cotton abolished with the aim of increasing textile exports. But farmers may have to suffer losses due to this.
If the import duty on cotton is abolished, then the prices of cotton in the domestic market may fall due to cheap imports from abroad. Apart from farmers, the Cotton Corporation of India (CCI), the government agency authorized to purchase cotton at the Minimum Support Price (MSP), may also have to bear the loss. Because out of the approximately 100 lakh bales purchased by CCI at MSP, about three-fourths of the stock is still with it.
According to sources, the Ministry of Textiles is in favor of abolishing the import duty on cotton and CCI is also expected to agree on this issue. There is a lot of lobbying by the yarn and fabric industry for the removal of import duty on cotton. Currently, 10 percent import duty is applicable on cotton and 10 percent cess is levied on it, due to which the effective import duty becomes 11 percent.
Lalit Kumar Gupta, CMD of Cotton Corporation of India (CCI), told Rural Voice that India imports 10 to 15 lakh bales of special quality cotton every year and this import is not affected by customs duty. Because this kind of cotton is not produced in the country and it has to be imported. The central government had recently called a meeting of the Committee on Cotton Production and Consumption (COCPC) to discuss the issue of cotton import, in which the opinion of most of the people involved was in favor of abolishing the import duty on cotton. Some people involved in the meeting also said that in case of removal of duty, the prices of cotton outstanding with the farmers will fall.
When asked about CCI's opinion on the removal of customs duty on cotton, Lalit Kumar Gupta said that whatever decision the government takes, we are with it. As far as farmers are concerned, their interests are protected by MSP. We are the agency responsible for protecting the interests of farmers. However, regarding the loss due to fall in prices, he says that we sell cotton in the market throughout the year. Sometimes we get high prices at the end of the year because in case of shortage of cotton in the market, ginning companies stop the goods and even then increase the price. Still, if CCI suffers any loss, the government compensates for it.
The Managing Director of CCI says that the yarn and fabric industry is of the opinion that government interference should be less. At the same time, if India abolishes customs duty, then due to the opening of the Indian market for import, the prices of cotton in the global market increase by one to two percent. Along with this, he told that there is no customs duty on cotton in any country other than India. We have import duty on cotton from 2022. He said that CCI is selling cotton at the price of Rs 55 thousand to Rs 56 thousand per candy (about 356 kg). In the current season 2024-25, CCI has purchased 100 lakh bales of cotton (170 kg per bale) and about 25 percent of it has been sold in the market.
The season of buying cotton at MSP by CCI has also ended. In such a situation, about two-thirds of the crop is either with the farmers or the farmers have sold it to the traders. Industry sources say that farmers have 60 to 65 lakh bales of cotton. If the government removes the import duty on cotton, then its import will cost around Rs 48 to 50 thousand per candy. In that situation, the prices of domestic cotton being sold by CCI at Rs 55 to 56 thousand per candy may be adversely affected. Not only will this harm the farmers, but if the prices fall, industry sources are fearing that CCI may also suffer a loss of more than Rs 2000 crore on the outstanding stock.
For the cotton season 2024-25, the Cotton Association of India (CAI) had estimated cotton production in the country to be 302.25 lakh bales, which was reduced to 295.30 lakh bales in March 2025. According to CAI, the consumption estimate for the current year is 313 lakh bales. At the same time, in the second advance estimate of agricultural production released by the government on March 11, 2025, cotton production has been reduced to 294.25 lakh bales. The Ministry of Agriculture had released an estimate of cotton production to be 299.26 lakh bales in the first advance estimate released in November 2024.
If the government abolishes the import duty on cotton, then farmers will be discouraged at the time of sowing the new crop as the cotton sowing season is starting. The government had announced the Cotton Mission in this year's budget, which aims to promote cotton production in the country. If cheap cotton is imported into the country, then the government's objective along with the farmers may be adversely affected. Along with this, this issue can also take a political color and farmer organizations can oppose this move of the government. The special thing is that there are about 220 Lok Sabha seats in the country where cotton is produced. In such a situation, this matter is also politically very sensitive.
