Summary
- Textile industry seeks relief from high prices, tight supplies
- Poor rains, pests and outdated GM seed technology cut output
- Imports could benefit suppliers in the US, Brazil, Australia
India is expected to extend duty-free cotton imports for another two months through December, three government and industry sources said, in a move that could cut costs for textile mills, curb domestic prices and boost imports from the US, Brazil and Australia.
India, the world’s biggest cotton producer after China, waived the 11% customs duty on cotton imports for five months from June 1 through October 31 to boost supplies during the lean season.
Domestic prices usually ease when new-season arrivals begin in October, but have remained firm this year amid lower output prospects, prompting mills to seek a longer duty-free import window.
After the completion of inter-ministerial consultations, the government is expected to issue an order soon extending the duty exemption at least until December end, said the sources familiar with the matter.
The finance, commerce and textile ministries did not immediately respond to emailed requests for comment.
Analysts said additional imports could support global cotton prices and help curb domestic rates, which have risen after patchy monsoon rains cut crop prospects.
Domestic cotton prices are above 9,000 rupees ($94.80) per 100 kg, higher than the government-set floor price of 8,717 rupees for the new season.
Lower domestic output, a tight stock-to-use ratio of about 31% — its lowest level in five years — and strong textile demand supported the case for extending the duty exemption, said Dipanshi Agarwal, principal analyst at S&P Global.
However, it could weigh on domestic prices, she said.
India’s cotton output is likely to fall below 29 million bales in 2026-27, against demand of more than 34 million bales, according to trade estimates.
In the absence of newer upgrades, farmers use outdated genetically modified cotton seeds, leaving the crop vulnerable to pest attacks and lower yields.
Higher benchmark US cotton futures , trading above 83 cents per pound, elevated freight costs and a weaker rupee could limit large imports even if the duty-free window is extended, said a dealer with a global trading house.
India’s cotton imports rose 63% year-on-year to $1.1 billion during the first six months of the current fiscal year from April, trade ministry data showed.
India should remove the import tax for an extended period, which has only raised manufacturers’ production costs, to help the textile industry compete with Vietnam and Bangladesh, said Chandrima Chatterjee, secretary-general of the Confederation of Indian Textile Industry.
Source: https://www.reuters.com/