India Extends 11% Cotton Import Duty Waiver to December 31

India's Central Government has extended the 11% customs duty exemption on raw cotton imports by two months, moving the expiry date from October 31 to December 31. The waiver, first introduced on May 30, lets spinning mills and garment manufacturers buy cotton from international markets without paying the applicable import duty.

The decision targets a widening supply gap. The Southern India Mills Association (SIMA) estimates India's cotton production for the 2026–27 season at around 280 lakh bales, against a usual output of more than 300 lakh bales. The industry's estimated annual requirement stands at 360 lakh bales. That leaves a shortfall of roughly 80 lakh bales, which imports must cover.

Who gains from the extension?

The exemption is designed to deliver relief to domestic textile mills and garment manufacturers, particularly Micro, Small and Medium Enterprises (MSMEs). It improves cotton availability, eases raw material cost pressure and supports sector competitiveness at a moment of lower production and rising prices. India, the world's second-largest cotton producer after China, has already seen domestic cotton prices climb on concerns over crop output and rising textile demand.

The stakes run deep in the cost structure. According to SIMA, cotton represents approximately:

• 70% of yarn manufacturing costs
• 50% of fabric manufacturing costs
• 30–35% of garment manufacturing costs

Ensuring cotton availability at internationally competitive prices is therefore critical for maintaining production and profitability across the textile value chain. Higher raw material costs have already raised concerns about the competitiveness of Indian yarn, fabric and apparel manufacturers in both domestic and international markets.

What limits the actual benefit?

The government measure is a duty waiver, not a guaranteed price cut. The actual benefit to manufacturers will depend on the difference between domestic and imported cotton prices, along with shipping, insurance, storage and financing expenses. If landed import costs converge with local prices, the effective saving shrinks. Sourcing teams will need to run the full landed-cost calculation before committing to import volumes.

The extension does, however, remove one variable: manufacturers can continue sourcing from international markets through the end of the calendar year without the 11% duty adding to their bill.

How are margins already moving?

Measured results are appearing in company accounts. According to industry estimates, several listed textile companies — including KPR Mill, Vardhman Textiles, Ambika Cotton and Indo Count — have reported EBITDA margin improvements of around 200–300 basis points quarter-on-quarter. Higher capacity utilisation and improved demand have also supported the operating performance of spinning mills.

The extension coincides with expectations of stronger demand through the festive and winter seasons, including Dussehra, Diwali, Christmas and New Year, alongside a gradual improvement in export orders. For apparel exporters, the timing matters: the waiver covers the sourcing window that feeds those delivery schedules.

The government also expects the extension to help the industry manage cotton supply uncertainties through the end of December while manufacturers work to hold production levels and price competitiveness. Whether the waiver becomes permanent, or lapses after December 31, will depend on how the 2026–27 crop and domestic price levels develop.