Why in the News?

• The government has temporarily exempted all customs duties on cotton imports for five months, from June 1 to October 30, 2026, to improve cotton availability and reduce input costs for the domestic textile industry.

What’s in Today’s Article?

• Cotton Production in India (Statistics, Area & Production, Cotton Producing States, etc.)
• Import Duty on Cotton (Background, News Summary, Industry Response, Impact, etc.)

Cotton Production in India

• Cotton, often referred to as "White Gold", is one of the most important commercial crops in India.
• It plays a central role in the country's agricultural economy and is the primary raw material for the textile and apparel industry, which is India's second-largest employer after agriculture.
• India is the world's largest cotton producer, accounting for approximately 25% of global cotton production.
• It is also the only country that cultivates all four species of cotton:

• G. Arboreum and G. Herbaceum (Asian cotton)
• G. Barbadense (Egyptian cotton)
• G. Hirsutum (American Upland cotton)
  • G. Hirsutum accounts for 90% of hybrid cotton production in India and forms the basis of all current Bt cotton hybrids.

Area and Production

• India has the largest area under cotton cultivation globally, covering approximately 114.47 lakh hectares, which is roughly 37% of the global total.
• However, India's productivity remains low at about 437 kg per hectare, ranking around 40th globally, compared to higher yields in countries like China, the US, and Australia.
• About 67% of India's cotton is grown on rain-fed areas, with only 33% on irrigated land, making production vulnerable to monsoon variability.

Major Cotton-Producing States

• Cotton production in India is concentrated in nine major states, grouped into three agro-ecological zones:

• Northern Zone: Punjab, Haryana, and Rajasthan
• Central Zone: Gujarat, Maharashtra, and Madhya Pradesh
• Southern Zone: Telangana, Andhra Pradesh, and Karnataka
• As per the Economic Survey 2025-26, the top three cotton-producing states are Maharashtra, Gujarat, and Telangana. Cotton is also grown in Odisha and Tamil Nadu.

• Economic Significance

• Cotton production supports approximately 6 million farmers and 40-50 million people in trade and processing activities.
• The Cotton Corporation of India (CCI) operates 508 procurement centres across 152 cotton-growing districts in 11 major cotton-growing states.
• The Minimum Support Price (MSP) mechanism ensures price stability for cotton farmers.

Background: Import Duty on Cotton

• India's cotton import duty policy has fluctuated over the years, reflecting the government's attempt to balance the interests of domestic cotton farmers and the textile manufacturing industry.
• Need for Cotton Imports

• Quality and specification requirements: Certain segments of the textile industry, particularly those catering to export orders, require specific cotton varieties, such as extra-long staple (ELS) cotton, that are not sufficiently available domestically.
• Seasonal supply gaps: Domestic cotton availability can be inconsistent due to monsoon dependence, pest attacks, and post-harvest losses.
• Rising domestic prices: When domestic cotton prices rise sharply, imports help moderate price levels and ensure raw material availability for manufacturers.

• Import Duty History

• India had traditionally imposed an 11% customs duty (including basic customs duty and social welfare surcharge) on cotton imports.
• In August 2025, the government temporarily removed the import duty on cotton to provide relief to the textile sector, which was facing rising input costs and global competition.
• The duty-free window lasted from August to December 2025.
• On January 1, 2026, the 11% import duty was reinstated, drawing criticism from the textile industry, which argued that the duty was hindering competitiveness and raising production costs.
• Industry bodies like the Confederation of Indian Textile Industry (CITI) and the Apparel Export Promotion Council (AEPC) had been consistently advocating for duty relief.
• They cited the need for Indian manufacturers to compete with Asian peers, such as Bangladesh, Vietnam, and China, that have free access to international cotton without import duties.

• Industry vs. Farmer Interests
  • The cotton import duty debate involves a delicate balancing act:
    • Textile manufacturers argue that the duty raises input costs, reduces competitiveness, and hampers export growth.
    • Cotton farmers and farmer organisations contend that duty-free imports could depress domestic cotton prices, undermining farmer incomes and the MSP mechanism.
    • The government has attempted to address both concerns through temporary and targeted duty waivers rather than permanent removal.

News Summary: Government Waives Cotton Import Duty

• The Ministry of Finance has issued a notification exempting all customs duties on cotton imports for a five-month period from June 1 to October 30, 2026.
• This effectively removes the 11% import duty that was reinstated on January 1, 2026.
• The government stated that the measure is intended to increase cotton availability for the Indian textile sector and reduce input costs for manufacturers, while keeping the interests of domestic cotton farmers in mind.

Industry Response and Impact

• Industry experts welcomed the duty exemption, noting that it is expected to reduce input costs across the textile value chain, improve cotton availability, enhance export competitiveness, and provide significant relief to MSMEs facing rising cotton and yarn prices.
• Experts also urged spinning mills to pass on the benefits through lower cotton costs to help stabilise the sector.
• Industry bodies highlighted that the import duty had become a constraint on growth, while cotton imports are largely demand-driven and cater to specialised export requirements without affecting domestic cotton consumption.

Sectoral Context

• The textile and apparel sector is India’s second-largest employer and a major contributor to GDP and exports.
• Textile and apparel exports declined by 2.2% year-on-year to $35.79 billion in FY26.
• The MSME-dominated sector has been facing competitiveness challenges due to supply-chain disruptions and rising input costs.

Expected Impact

• The duty waiver is expected to:
  • Moderate domestic cotton prices during lean supply periods.
  • Reduce production costs for textile and apparel manufacturers.
  • Improve export competitiveness and order acquisition.
  • Provide substantial relief to MSMEs, which are most vulnerable to input-cost pressures.