The Central Government has extended the customs duty exemption on raw cotton imports by two months until December 31, retaining the 11% import duty waiver.
The move is expected to provide relief to domestic textile mills and garment manufacturers by improving cotton availability, easing raw material cost pressures and supporting the competitiveness of the sector, particularly Micro, Small and Medium Enterprises (MSMEs), amid concerns over lower cotton production and rising prices.
However, the actual benefit to manufacturers will depend on the difference between domestic and imported cotton prices, along with shipping, insurance, storage and financing expenses.
The exemption was initially introduced on May 30, and was due to expire on October 31. The extension will allow manufacturers to continue sourcing cotton from international markets without paying the applicable import duty.
According to the Southern India Mills Association (SIMA), India’s cotton production during the 2026–27 cotton season is estimated at around 280 lakh bales, compared with its usual output of more than 300 lakh bales. This is also below the industry’s estimated annual requirement of 360 lakh bales.
India, the world’s second-largest cotton producer after China, has witnessed an increase in domestic cotton prices amid concerns over lower crop output and rising textile demand.
Higher raw material costs have raised concerns about the competitiveness of Indian yarn, fabric and apparel manufacturers in domestic and international markets.
Cotton accounts for approximately 70% of yarn manufacturing costs, 50% of fabric manufacturing costs and 30–35% of garment manufacturing costs, according to SIMA.
Ensuring the availability of cotton at internationally competitive prices is therefore important for maintaining production and profitability across the textile value chain.
The duty exemption comes amid expectations of improved demand during the festive and winter seasons, including Dussehra, Diwali, Christmas and New Year, as well as a gradual improvement in export orders.
