Govt mulls customs duty relief on cotton import to support textile industry

New Delhi: The government is considering a proposal to reduce or withdraw customs duty on raw cotton imports to support the local textile industry due to a surge in raw material prices amid the disruptions caused by the ongoing West Asia war.

India’s textile industry mostly uses domestic cotton, but it imports long-staple variety mainly from the US, Egypt and Australia, and some from Brazil.

Addressing the media on the supply chain scenario amid the war in West Asia, Bipin Menon, trade advisor in the textiles ministry, said discussions were on with the ministry of agriculture and the department of revenue on customs duty reduction or elimination for cotton.

He said the ministry has also sought withdrawal of the 2.5% customs duty on rayon-grade wood pulp used to produce viscose staple fibers and filament yarns. Rayon-grade wood pulp is a highly-purified form of cellulose obtained from wood, specifically processed for man-made fibres. It is used as the primary raw material to produce viscose staple fibre and viscose filament yarn used to make textiles, apparel and industrial fabrics. In November 2025, the government had withdrawn the quality control order on VSF to support the textile sector.

He, however, added that the constraints in rayon-grade wood pulp were not directly linked to the ongoing West Asia war disruptions, so the proposed customs duty changes could wait for the time being.

India’s textile industry meets a significant share, about half of its requirement for rayon-grade wood pulp, through imports, largely from countries such as the US, Canada, Brazil and Indonesia.

Menon said the ministries are also discussing whether a “temporary” reduction in duty could be made for the industry's lean season.

Amid weak global demand and pricing pressures, India's exports of readymade garments fell to $15.77 billion in FY26 from $15.99 billion in the previous year.

Raw cotton imports into India attract a 5% basic customs duty. The government had exempted the commodity from import duty from 19 August to 30 September 2025. This was later extended till 31 December 2025.

Menon said a monitoring cell had been formed to explore measures to help the textile industry. "The ministry is holding periodic meetings with stakeholders on a weekly basis for monitoring the situation. These include meetings with export promotion councils (EPCs), domestic associations, regional cluster associations (Tirupur, Surat, Pali Balotra), state government officials,” he said.

Amid the current supply chain disruptions, reducing or eliminating duties on cotton and rayon-grade wood pulp will directly lower raw material costs for the textile industry, improve margins and enhance export competitiveness, said Amit Singh, associate professor at the Special Centre for National Security Studies at the Jawaharlal Nehru University.

"It can provide a much-needed boost to the entire textile value chain, particularly at a time when global demand remains weak,” Singh said.

The textile and apparel sector is one of India's top export earners, accounting for around 8–10% of the total merchandise exports. Textile exports are currently valued at about $35-40 billion annually, and the government has set a target to scale this up to $100 billion by 2030.