Cotton Import Duty Exemption Extended to December 31: Customs Duty, Cotton Farming and MSP Explained
The Union Finance Ministry issued a notification on October 30, 2026, extending the exemption from import duty on cotton.
The exemption was first granted in May 2026 and was due to end on October 31, 2026. It will now continue until December 31, 2026.
This means textile mills can bring raw cotton from other countries without paying customs duty. The normal duty on raw cotton is 11% (5% Basic Customs Duty plus 5% Agriculture Infrastructure and Development Cess, plus a small surcharge).
A weak Southwest monsoon hurt this year's cotton crop. Daily arrivals of cotton in markets remain low, even though the new cotton marketing season began on October 1.
The textile industry, the largest user of cotton, expects its cotton consumption to rise this year and has been asking for the import duty to be removed.
Customs Duty in India: Basic Customs Duty, Cess and the Effective Rate
Customs duty is a tax the government charges on goods that cross India's border, mostly on imports. The power to levy it belongs to the Union (Entry 83 of the Union List), and it is collected under the Customs Act, 1962, at rates listed in the Customs Tariff Act, 1975. The total duty a buyer pays, called the effective rate, is built up from several parts: Basic Customs Duty, cesses such as the Agriculture Infrastructure and Development Cess, and a surcharge. Under Section 25 of the Customs Act, the government can exempt goods from duty, fully or partly, through a notification, often for a fixed period.
The extension uses the government's exemption power under the Customs Act to keep raw cotton imports duty-free until December 31, 2026. With the domestic crop hurt by a weak monsoon, duty-free imports help textile mills get enough cotton at lower cost.
Cotton Cultivation in India
Cotton is a kharif crop grown for the soft fibre around its seeds, which is spun into yarn for textiles. It needs warm weather, a long frost-free period, moderate rainfall and well-drained soil; the black soil (regur) of the Deccan plateau suits it best. It is often called "white gold" because so many farmers and textile jobs depend on it. Most of India's cotton area is rainfed, so the Southwest monsoon strongly affects the size of the crop.
Because most cotton is grown on rainfed land, a poor Southwest monsoon cut the crop and slowed arrivals into markets. That shortfall is the main reason the government extended duty-free imports for the textile industry.
Minimum Support Price (MSP) Mechanism
The Minimum Support Price is a price at which the government promises to buy certain crops from farmers, so that they do not have to sell below it if market prices crash. MSPs are announced for 22 crops on the recommendation of the Commission for Agricultural Costs and Prices (CACP) and approved by the Cabinet Committee on Economic Affairs (CCEA). Since 2018-19, MSP is fixed at least at 1.5 times the A2+FL cost of production. For cotton, the Cotton Corporation of India (CCI) buys from farmers at MSP whenever market prices fall below it.
Duty-free imports help mills, but cotton farmers worry that cheaper foreign cotton will push market prices below MSP during their harvest. This tension between farmers (who want higher prices) and textile mills (who want cheaper raw material) shapes every decision on cotton import duty.
- Notification date: October 30, 2026 (Union Finance Ministry)
- Exemption first granted: May 2026; earlier end date: October 31, 2026; new end date: December 31, 2026
- Normal duty on raw cotton (HS 5201): about 11% (5% BCD + 5% AIDC + Social Welfare Surcharge)
- Legal basis for exemptions: Section 25, Customs Act, 1962
- Cotton marketing season: October 1 to September 30; bale = 170 kg
- Cotton MSP 2026-27: ₹8,267/quintal (medium staple), ₹8,667/quintal (long staple)
- Nodal agency for cotton MSP procurement: Cotton Corporation of India (CCI), Ministry of Textiles
- Bt cotton: India's only approved GM crop (since 2002)