India is preparing to give textile mills a much-needed breather. The government will likely keep cotton imports completely duty-free for another two months, stretching the tax break through the end of December. Back on June 1, authorities dropped the 11% import tax, setting an initial deadline of October 31. Now, officials want to keep that window open longer so mills can get raw material without paying inflated domestic rates.
Local market prices have already crossed ₹9,000 per 100 kg. That is noticeably higher than the government support price of ₹8,717 set for the fresh crop cycle. Because domestic fiber is getting expensive and scarce, local mills are finding it tough to maintain their profit margins.
Key Highlights
- India plans to stretch its zero-duty cotton import window through December 2026.
- Local spot prices have jumped past ₹9,000 per 100 kg, well over the official floor price of ₹8,717.
- Crop output for 2026–27 looks set to drop under 29 million bales, while domestic demand sits above 34 million bales.
- Cotton arrivals from overseas jumped 63% year-on-year to $1.1 billion between April and September.
- The national stock-to-use ratio has fallen to about 31%, touching a five-year low.
The push to extend zero-duty buying comes directly from worries about shrinking farm supplies. Production for the 2026–27 season is heading below 29 million bales. At the same time, Indian spinning mills and textile units require more than 34 million bales just to keep their machines running. With inventories shrinking, the country's stock-to-use ratio has dropped to roughly 31%, which is the lowest level seen in half a decade.
Farms have struggled this season. Rain patterns were uneven across several major growing pockets. On top of that, farmers are still planting older genetically modified seeds that struggle against pests, cutting down yields across farms in central and western belts.
Because local supply is running short, mills have already started buying heavily from overseas. In the first half of this fiscal year—from April through September—India spent $1.1 billion on foreign cotton, marking a massive 63% jump compared to the same period last year. If the tax break continues, mills will likely order more shiploads from the United States, Brazil, and Australia. Textile manufacturers have been pushing hard for this move, saying zero duties help them keep yarn prices competitive against export rivals like Bangladesh and Vietnam.
Still, foreign cotton won't solve every headache. International cotton futures are currently hovering above 83 cents a pound. When you add high ocean freight rates and a weaker Indian rupee to the bill, landing foreign cotton at Indian ports gets quite pricey. These extra costs could eat into the savings that the tax waiver provides.
Conclusion for Indian Cotton Traders and Textile Mills
- Short-Term Price Relief:Keeping import taxes at zero helps cap runaway domestic prices, giving mills some room to negotiate better deals.
- Currency and Shipping Risks:A softer rupee combined with elevated ocean shipping rates means overseas cotton will still carry a noticeable price tag.
- Supply Deficit Stays Real:Because local production is trailing demand by over 5 million bales, Indian textile businesses will need to manage inventory carefully well into early next year.