India: Govt advances talks on cotton import duty removal amid rising fibre costs

• Domestic cotton prices rise sharply against global benchmarks
  
  
• Textile mills seek duty relief to improve export competitiveness
  
  

India's textile industry may receive policy support as the government has entered advanced-stage consultations on demands to remove the 11% duty on cotton imports amid tightening domestic availability and rising fibre prices. The discussions come as spinning mills and textile manufacturers face mounting pressure on margins due to elevated raw material costs and comparatively cheaper global cotton.

Industry participants said domestic cotton prices have surged nearly 25% over the past two months, supported by lower crop expectations and firm mill demand. Market estimates indicate India's cotton production could fall around 10% below initial projections for the current season, intensifying concerns over supply availability for the downstream textile sector.

Domestic prices remain above global parity

International cotton prices, represented by the Cotlook A Index, were assessed around 88-92 cents/lb during May, while Indian Shankar-6 cotton prices were quoted at INR 60,000-66,000 per candy. These levels, equivalent to nearly 89-98 cents/lb, indicate that domestic fibre remains at a premium to international benchmarks.

Moreover, Indian cotton continued trading at a premium to imported fibre even after accounting for freight and duty costs. Industry bodies noted that the existing duty structure has widened the gap between domestic and global cotton prices, affecting India's yarn and textile export competitiveness against Bangladesh and Vietnam, where mills have easier access to lower-cost imported fibre.

Market participants added that several mills, particularly in southern India, have adopted cautious procurement strategies and are largely purchasing on a need basis amid uncertainty over policy direction and crop prospects. Traders indicated that import enquiries for Brazilian and US cotton have increased in recent months despite the prevailing duty burden.

Short-term outlook

The domestic cotton market is expected to remain firm until clarity emerges on import duty policy and crop availability. Any temporary removal or reduction in duty could improve mill buying interest, ease raw material inflation, and support India's textile export competitiveness in the near term.