India Temporarily Removes Cotton Import Duty To Support Textile Industry

New Delhi, Aug 19 (KNN) The government has temporarily eliminated the 11 percent duty on raw cotton imports for 42 days ending September 30, providing interim relief to the textile and garment sector amid concerns over revenue losses from increased US tariffs.

The finance ministry announced the measure on Monday through a notification by the Central Board of Indirect Taxes and Customs, removing both basic customs duty and the Agriculture Infrastructure and Development Cess on cotton imports from August 19 to September 30.

The duty exemption is expected to benefit the entire textile supply chain, including yarn, fabric, garments and made-up products, while providing relief to both industry participants and consumers.

Industry bodies, particularly the Confederation of Indian Textile Industry (CITI), had long advocated for this measure, arguing that access to high-quality, contamination-free cotton is essential for meeting global quality compliance standards required for exports.

The removal is anticipated to have a positive impact on domestic cotton pricing.

Chandrima Chatterjee, Secretary, CITI, welcomed the government's decision despite its temporary nature, stating that the organisation had consistently requested the removal of import duty on cotton to help align domestic prices with international markets.

While industry participants acknowledge that the measure may not generate substantial gains through new shipments, they have expressed optimism that the exemption could be extended beyond the current timeframe.

The relief measure comes as an immediate confidence boost for an industry grappling with a 50 percent US tariff that has significantly impacted operations.

Export companies have either suspended shipments to the United States or are fulfilling orders at a loss, while major American retailers including Walmart, Target, Amazon, TJX Companies, Kohl's, Gap Inc., and H&M have requested their Indian suppliers to hold consignments pending tariff clarity.

India faces substantial competitive challenges in the American market, with the 50 percent tariff placing it at a steep disadvantage compared to other textile-exporting nations.

Bangladesh and Vietnam face tariffs of 20 percent, while Indonesia and Cambodia encounter 19 percent duties. Even China, at 30 percent, maintains a more favourable position than India.

Industry leaders express concern not only about immediate revenue losses but also about the potential for losing market share to competitors.

The United States represents India's largest market for textile and apparel exports.

According to CITI data, India's exports to the US increased to USD 5.36 billion during the first six months of calendar 2024, representing a 12 percent rise from USD 4.79 billion in the corresponding period, positioning India as the third-largest supplier.

Vietnam, currently the second-largest supplier, recorded USD 8.54 billion in exports with a 19 percent increase, while Bangladesh demonstrated strong recovery from previous political disruptions with a 24 percent surge to USD 4.36 billion.

China, despite maintaining its position as the largest supplier, experienced a 16 percent decline to USD 9.34 billion.

India has established an ambitious target of achieving textile exports worth USD 100 billion by 2030, making the resolution of current trade challenges crucial for meeting this objective.

(KNN Bureau)