Why has the import duty on cotton been suspended? , Pg8

Key Highlights:

• The Central government has suspended the 11% import duty on cotton until September 30, 2025, initially introduced in February 2021.
• This decision comes amid declining domestic cotton production, which is at a 15-year low of 294 lakh bales.
• Cotton imports have surged, with a 107.4% increase in FY2024-2025, reaching $1.20 billion.
• The Cotton Corporation of India (CCI) purchased nearly 100 lakh bales of cotton from farmers at Minimum Support Price (MSP), spending ₹37,500 crore.

Detailed Insights:

• The import duty was initially imposed to protect domestic cotton growers when India's production was 350 lakh bales against a requirement of 335 lakh bales.
• Despite the duty, cotton imports increased significantly, with major supplies coming from Australia, the U.S., Brazil, and Egypt.
• Current domestic cotton production is insufficient to meet the demand of 318 lakh bales, necessitating higher imports estimated at 40 lakh bales.
• The government has increased the MSP by 8% for the 2025-2026 cotton season starting October 1, 2025.
• Textile industry seeks a stable policy with annual duty suspensions during the non-peak season (April to September) and a 5% interest subvention for working capital.
• Some cotton farmers are concerned that the removal of import duty will discourage domestic cotton cultivation due to lack of government support.

Key Concepts Involved:

• Minimum Support Price (MSP): A price set by the government to purchase crops from farmers, ensuring a minimum profit.
• Interest Subvention: Government assistance that reduces the interest rate on loans, easing the financial burden.
• Bales: A compressed package of cotton, typically weighing around 170 kg (375 lbs) in India.