Textiles seek more incentives as govt extends duty-free cotton imports

Tamil Nadu urges higher export incentives and faster EU trade deal as duty-free cotton imports extended till Dec 31, while farmers complain of falling domestic cotton prices due to cheap US supplies

The government on Thursday extended its import duty exemption on cotton by another three months till December 31, 2025, in a bid to help the domestic textile industry tide over the 50 per cent US tariffs.

 

“In order to support exporters further, the Central government has decided to extend the import duty exemption on cotton (HS 5201) from September 30, 2025 till December 31, 2025,” an official statement said.

 

The exemption, first announced by the Finance Ministry for the period August 19 to September 30, 2025, was aimed at improving the availability of raw cotton and easing pressure on exporters.

   

The relief covers the 5 per cent Basic Customs Duty (BCD), the 5 per cent Agriculture Infrastructure and Development Cess (AIDC), as well as a 10 per cent Social Welfare Surcharge on both. These levies translate into a combined duty burden of around 11 per cent on cotton imports.

 

Duty-free cotton import will bring down the cost of different items by 1-5 per cent depending on the extent of cotton in a product, as international cotton is available at 10 per cent lower than Indian cotton.

 

Meanwhile, the Tamil Nadu government has sought swift action from the Centre to deal with the impact of the tariff by the US on the textile industry, which included a rise in export incentives by at least 10 per cent to support the Tiruppur cluster.

 

Seeking a 10 per cent increase in incentives, Tamil Nadu Industries Minister TRB Rajaa said that knitwear textile hub of Tiruppur was staring at a loss of around ₹2,000 crore per month, which was around 40 per cent of the region’s total exports.

 

Tiruppur, along with nearby Coimbatore, contributed around 69 per cent (around ₹44,747 crore) of the total knitwear exports (₹65,178 crore) of India in 2024-25. 

 

According to industry estimates, out of this, over ₹13,000 crore is the share of the United States market.

 

The industry players too urged the Centre for incentives and assistance in finding alternate markets. They also appealed to the government to fast-track the European Union trade deal.

 

Some industry players also sought government intervention for a duty-free access to the Russian market.

 

Apparel Export Promotion Council chairman Sudhir Sekhri has written a letter to Prime Minister Narendra Modi saying that the Indian apparel sector is seeing a risk of being tossed out of the US market due to the higher tariff.  He asked the government to speed up the EU trade deal.

 

Farmers, meanwhile, are already feeling the heat of import duty cuts. Sources said the price of domestic cotton has dropped by almost ₹1100 per candy from the earlier levels of around ₹55,000- ₹56,000 a candy for medium staple cotton varieties.

 

The Samyukta Kisan Morcha (SKM) in a statement issued a few days ago, when the duty was first eliminated,

 

had said that decision will result in a reduction in the price of imported cotton which, in turn, will push prices of domestic cotton downwards.

 

It said that the US government gives subsidies as high as 12 per cent of the total value of production of cotton. While in India, government support to cotton farmers is about 2.37 per cent of the value of production. This massive disparity is at the core of the advantage US cotton farmers have over cotton producers in developing countries, SKM said. 

  (With inputs from Sanjeeb Mukherjee)