UPSC Prelims Practice Questions — Government extends import duty exemption for cotton

Q1. With reference to the power to exempt goods from customs duty under the Customs Act, 1962, consider the following statements: Which of the statements given above is/are correct?

  1. The Central Government may grant such an exemption by notification when it is satisfied that doing so is necessary in the public interest.
  2. An exemption under this power may cover only a part of the duty and may be made subject to conditions.
  3. The power can be used to exempt Basic Customs Duty, but cesses and surcharges collected on imports cannot be waived through it.
  • A. 2 and 3 only
  • B. 1, 2 and 3
  • C. 1 and 2 only
  • D. 1 only

Q2. With reference to tariff commitments under the World Trade Organization, consider the following statements: Which of the statements given above is/are NOT correct?

  1. A member may charge an applied tariff on a product that is lower than its bound rate on that product.
  2. A member that raises its applied tariff on a product, while staying at or below the bound rate, must compensate the trading partners affected.
  3. A member may raise a bound rate itself, provided it negotiates and compensates the members whose trade is affected.
  • A. 1 only
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 2 only

Q3. With reference to the agro-climatic conditions for cotton in India, consider the following statements: Which of the statements given above is/are correct?

  1. Black soils suit cotton mainly because they are rich in humus.
  2. The black soils of the Deccan and Malwa plateaus have formed from basaltic lava rock and hold moisture well.
  3. Cotton is grown in India as a kharif crop, which suits its need for a long frost-free growing period.
  • A. 2 and 3 only
  • B. 1, 2 and 3
  • C. 1 and 3 only
  • D. 1 and 2 only

Q4. Consider the following assertion: Extending a duty-free import window for cotton into the opening months of a new cotton year can hurt cotton growers even as it helps the mills. Which of the following statements support/supports the above assertion?

  1. Duty-free imports add to the supply available to mills and so weaken the price that mills need to pay for domestic cotton.
  2. Customs exemptions are granted by executive notification without any change to the rates in the tariff law.
  3. The cotton year begins in October, when new-crop cotton starts reaching markets and farmers sell their harvest.
  • A. 1 only
  • B. 1 and 3 only
  • C. 1, 2 and 3
  • D. 2 and 3 only

Q5. India's cotton year, on which official cotton estimates and the CCI's MSP operations are based, runs from October to September instead of April to March. Which one of the following best explains this choice of period?

  • A. It follows the sowing of a crop that relies on the Northeast monsoon, so October marks the start of planting
  • B. It follows the harvest of a crop sown with the Southwest monsoon, so new-crop arrivals begin around October
  • C. It follows the second half of the fiscal year, when Union allocations for price support are released
  • D. It follows the harvest of a crop sown in the winter months, so rabi output reaches the markets around October

Q6. Before the 2025 waiver, raw cotton imports attracted 5 per cent Basic Customs Duty (BCD), 5 per cent Agriculture Infrastructure and Development Cess (AIDC) and a 10 per cent Social Welfare Surcharge (SWS), yet the effective levy was about 11 per cent rather than 20 per cent. Which one of the following explains this?

  • A. SWS is set off against AIDC through an input credit, so that only BCD and SWS are finally paid
  • B. SWS is charged as a percentage of the value of the goods, while AIDC is charged on the BCD amount
  • C. SWS is charged as a percentage of the BCD and AIDC amounts, not of the value of the imported goods
  • D. AIDC is charged in place of a part of BCD, so that only one of the two levies applies at a time

Q7. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. The Cotton Corporation of India's purchases of cotton under MSP operations have no fixed quantitative ceiling.
  2. The Minimum Support Price for cotton is recommended by the Commission for Agricultural Costs and Prices before the start of each cotton year.
  • A. Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
  • B. Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
  • C. Statement-I is correct, but Statement-II is incorrect
  • D. Statement-I is incorrect, but Statement-II is correct