To reduce prices, the central government on Wednesday exempted cotton imports from 5% basic customs duty and 5% agriculture and infrastructure development cess, an official order showed.
The Finance Ministry said in the order that the decision to cut duty has been taken in public interest. The duty relief, effective from Thursday to September 30, will be applicable across the textile value chain including yarn, fabric, garments and made ups and will provide relief to consumers, an official said on condition of anonymity.
The move is also expected to benefit textile exports as they are not required to refund taxes on raw materials under export promotion schemes. The duty cut has been taken amid reports of a rise in cotton prices. Official data shows WPI-based inflation in the textiles sector has been in double digits for several months now.
The government introduced 10% duty on cotton in the Union Budget for FY22 to give tariff protection to domestic cotton growers from imports. Inflation has forced the government to reduce duty on edible oils in recent months as well.
India is facing a surge in inflation with the March figure touching 6.95% due to a jump in food and fuel prices. The rise in prices of commodities and manufactured goods is widely seen as a slowdown for the economy reeling from the effects of the pandemic.
Welcoming the duty cut, Federation of Indian Export Organization (FIEO) said duty-free import of raw cotton will boost exports of value-added cotton textiles. In a statement to the industry body, its chairman A. Sakthivel was quoted as saying that this move will also give a big boost to the export of garments by softening the prices of yarn and fabrics. The high cotton prices are blunting the industry’s competitive edge, the statement said.