India removes cotton import duty to mitigate US tariff impact

The government said that the elimination of Basic Customs Duty (BCD) and Agriculture Infrastructure and Development Cess (AIDC) on cotton is necessary in the public interest. Duty-free cotton imports will, however, be permitted only for a limited period, available until 30 September this year, when the current marketing season ends.

The removal of duty on cotton has come amid widespread fears of job losses in the textile sector due to steep 50 per cent US tariffs that would leave Indian products uncompetitive in the US, the country’s largest export market. US has already imposed 25 per cent reciprocal duty on August 7 this year. Additional 25 per cent is slated to come into effect from August 27.

However, the industry felt that the elimination of import duty is windfall benefit for cotton in transit only. Otherwise, it is not possible to get cotton bales in such a short duration as the process involves booking, loading and arrival. Transit period for cotton import is minimum 40-50 days. India imports cotton mostly from the US, Brazil and West African countries.

Chandrima Chatterjee, Secretary General of Confederation of Indian Textile Industry (CITI) said, “CITI has long been requesting that the import duty on cotton be removed to help domestic cotton prices align with international prices. We, therefore, greatly welcome this measure taken by the authorities even though the relief is only available temporarily.”

As per the Apparel Export Promotion Council (AEPC), the textile sector is expected to be hardest hit sector due to steep US tariffs as US is a key market for Indian Ready-Made Garments (RMG) exports. US share in India’s total garment exports in 2024 stood at around 33 per cent.

Amid steep US tariffs, CITI had asked government’s intervention for easier availability of raw materials. CITI highlighted that the US tariff rate for India has been fixed at 50 per cent, while competing countries face lower rates—20 per cent for Bangladesh and Vietnam, and 19 per cent each for Indonesia and Cambodia.

ALCHEMPro News Desk (KUL)