Cotton imports will increase as India extends duty-free period

Cotton imports will increase as India extends duty-free period

India has extended the effective date of duty-free policy on imported cotton from September 30 to October 31, 2022; This is expected to lead to an increase in cotton imports, especially as prices fall sharply on the international market. But experts and textile companies say this will provide only temporary relief.

The Indian government said in a statement that it would extend the duty-free policy for imported cotton by one month due to irregular rains during the rainy season, which affected the planting time of cotton in some areas. India allowed cotton imports duty-free in April 2022 after falling production and rising global prices sent local cotton prices to record highs.

The new policy could ease pressure on India's textile industry as global cotton prices have fallen more sharply than domestic prices. Domestic cotton prices in the country have fallen to 80,000-90,000 rupees (about US $1,056-1,143) per bale (356 kg); But ICE cotton prices fell sharply, with the October 2022 contract trading at 99.89 cents per pound in mid-late July, equivalent to Rs 62,700 per 356 kg pack (about $792 per pack) or Rs 176 per kg (about $2.2 per kg). If the price gap remains unchanged over the next few months, cotton imports are expected to increase and improve the supply situation in India's domestic market.

The market is already feeling the pinch from the sharp drop in global cotton prices, but reduced supply has kept domestic prices from falling too far; Spinning mills and the weaving industry are also cautious about the possibility of another fall in prices. If duty-free imports of cotton increase, the country's domestic prices may face a downward trend.

However, experts and industry officials say the one-month extension will only provide temporary relief as the government has not permanently abolished import duties. Textile industry representatives had urged textiles and commerce minister PiyushGoyal to extend the import exemption until December 2022; But the government agreed to extend the exemption only if needed. Industry insiders say this approach does not help the manufacturing sector in long-term planning.