Repeated short-term customs duty exemptions on cotton reflect the tension between farm-income protection and industrial competitiveness. Critically examine.

On 30 October 2026, Notification No. 35/2026-Customs extended duty-free imports of raw cotton by two months, to 31 December 2026 [1]. Similar stop-gap waivers were given in 2022 [2] and 2025 [3]. Policy keeps swinging between mills' need for cheap fibre and farmers' need for fair prices.

Case for exemptions: Industrial competitiveness

• Lower input cost: waiving the 11% duty (5% BCD + 5% AIDC + 10% SWS) cuts landed cost for spinners and MSMEs [3].
• Export support: the waiver came in a package with RoDTEP and RoSCTL extensions to shield apparel exporters [4].
• Quality gap: India grows too little extra-long staple (ELS) cotton for premium yarn. The Parliamentary Standing Committee accepted that the duty made cotton costlier for industry [5].
• Limited scale: imports were only about 13.93% of consumption in 2024-25 [6].

Costs: Farm-income protection

• Price pressure: domestic prices fell from about ₹57,000 to about ₹52,500 per candy [6]. The current waiver overlaps the October–December harvest arrivals [7].
• Blanket coverage: the waiver covers all of heading 5201, not just ELS [4]. Ordinary imported cotton therefore competes with Indian kapas [5].
• Fiscal double burden: the government loses duty revenue and also buys more at MSP. CCI bought 105.09 lakh bales (~₹41,530 crore) in 2025-26 [7]. The Cabinet earlier approved ₹17,409 crore to cover CCI's MSP losses [8].
• Policy uncertainty: extensions announced a day before expiry give farmers no signal at sowing time [1]. The Committee warned that exemptions bring in cheap cotton and that the government should not give up duty revenue [5].

Assessment The tension is real, but it is partly self-created. The root cause is low yield: about 447 kg/ha against 1,830 kg/ha in Brazil, with about 67% of the crop rain-fed [5]. This keeps forcing imports, and tariff waivers only buy time.

Way forward

• Limit the exemption to ELS and other speciality varieties, and keep the duty on ordinary cotton.
• Announce the import window for the whole cotton year before sowing, and avoid the arrival months.
• Deliver the Mission for Cotton Productivity target (297 → 498 lakh bales by 2031) [7] through better seeds and drip fertigation [5], backed by Kasturi Cotton Bharat branding [7].

Short waivers ease mill costs but shift the burden to farmers and the exchequer. A predictable, variety-specific tariff combined with a productivity push can serve both interests. This would build a competitive "farm-to-fashion" value chain in line with SDG 8 (decent work and economic growth).