Tiruppur’s success runs on cheap cotton. India needs to ask who pays for it
India's cotton import duty has been repeatedly waived and reinstated over the past several years: waived in April 2022 amid high domestic fibre prices, reinstated in October 2022, removed again in August 2025, extended through December 2025, reinstated from January 1, 2026, and removed once more from June 1, 2026.
The Ministry of Finance's June 2026 notification exempted customs duty on cotton imports for a five-month window (June 1 to October 30, 2026), matching the pattern of prioritising input-cost relief for textile mills and exporters during periods of high domestic cotton prices.
Government data placed before Parliament (a Rajya Sabha reply, December 2025) showed domestic cotton prices falling from about Rs 57,000 to around Rs 52,000 per candy following the August 2025 duty exemption; specialist trade reports noted a similar fall — from about Rs 65,800 to Rs 61,000 per candy — within a month of the 2026 exemption.
The repeated duty removals have been sought by textile industry associations citing high input costs and export competitiveness, while raising concerns about the effect on farmgate prices received by cotton growers.
Cotton MSP Mechanism — CACP, CCI, and Government Price Support
The Minimum Support Price (MSP) for seed cotton (kapas) is recommended annually by the Commission for Agricultural Costs and Prices (CACP), an attached office of the Ministry of Agriculture and Farmers Welfare, generally following the formula of at least 1.5 times the cost of production (A2+FL), and approved by the Cabinet Committee on Economic Affairs (CCEA). Actual market-price support operations are carried out by the Cotton Corporation of India (CCI), the Central Nodal Agency designated by the Government of India, which procures Fair Average Quality (FAQ) cotton without quantitative ceiling whenever market prices fall below the MSP.
Key Details
- CACP recommends MSP using the cost-plus-50% formula (1.5x A2+FL cost of production).
- CCI is the designated Central Nodal Agency for MSP operations in cotton, with a procurement network spanning all 11 major cotton-growing states.
- The Cabinet has separately approved dedicated MSP funding to CCI (e.g., Rs 1,718.56 crore approved in 2026 for the 2023-24 cotton season) to cover the gap between MSP procurement cost and market resale price.
Import-duty exemptions and MSP operations are two distinct, sometimes conflicting, levers of cotton price policy — one lowers domestic prices to help mills, the other props up farmgate prices; when both operate simultaneously, MSP support can be undercut by duty-driven price declines.
Customs Duty as a Trade-Policy Lever versus MSP as a Farm-Support Instrument
Import duty on raw cotton is a tariff measure under India's customs framework, distinct in design and administration from the MSP/CCI procurement mechanism. Raising or removing this duty (historically 11% on raw cotton) changes the relative cost of imported versus domestic cotton, directly affecting the price mills are willing to pay domestic farmers, but it operates through the market rather than through direct government procurement.
Key Details
- The applicable customs duty on raw cotton imports has been 11% in recent years, prior to each exemption period.
- Duty exemption periods identified: April-October 2022, August-December 2025 (later extended), and June-October 2026 (five-month exemption per Finance Ministry notification).
- Because MSP support (CCI) works by procurement and customs duty works by altering import competitiveness, a duty waiver can depress open-market prices even while MSP nominally remains unchanged — meaning farmers selling outside CCI procurement centres are exposed to the lower market price.
The described price falls (Rs 57,000 to Rs 52,000 per candy; Rs 65,800 to Rs 61,000 per candy) illustrate how a customs-duty lever, applied for textile-sector relief, can move market prices independently of and potentially in tension with the MSP support the CACP/CCI framework is meant to guarantee farmers.
Institutional Representation in Cotton Policy: From Cotton Advisory Board to COCPC
Cotton-sector policy inputs were historically coordinated through the Cotton Advisory Board under the Ministry of Textiles. This function has since been reconstituted as the Committee on Cotton Production and Consumption (COCPC), formed in September 2020, which is mandated to generate production and consumption estimates annually to guide planning, including MSP operations and trade-policy decisions such as import duty.
Key Details
- COCPC formed: September 14, 2020, by the Ministry of Textiles, superseding the earlier advisory-board structure.
- COCPC membership draws on textile industry bodies, trade associations, and government departments; historically, organised industry associations have had denser institutional representation than dispersed cotton-growing farmers.
- Farmer-side price protection remains primarily routed through the separate CACP/CCI MSP mechanism rather than through COCPC itself.
The asymmetry in institutional representation — organised textile/exporter associations with a direct advisory channel versus farmers relying solely on the MSP safety net — is the structural condition underlying repeated duty reversals favouring mill-side input costs.
- Cotton import duty (standard rate) prior to exemptions: 11%.
- Duty exemption windows: April-October 2022; August-December 2025 (extended); June 1-October 30, 2026.
- Domestic cotton price fall after August 2025 exemption (Rajya Sabha reply, December 2025): ~Rs 57,000 to ~Rs 52,000 per candy.
- Domestic cotton price fall after 2026 exemption (trade reports): ~Rs 65,800 to ~Rs 61,000 per candy within a month.
- CACP MSP formula: 1.5 times cost of production (A2+FL).
- CCI procurement network: over 508 centres across 152 districts in 11 major cotton-growing states.
- COCPC (successor to Cotton Advisory Board) constituted: September 2020.