The Union Budget 2021-22 has proposed a 5% basic customs duty on imported cotton, and a 5% Agriculture Infrastructure Development Cess. The pre-existing 10 percentage point Social Welfare Cess continues, taking the aggregate duty burden to 11% ad valorem on cotton.
India imports 15 lakh to 20 lakh bales (of 170 kg each) of the fibre, especially superior varieties like Extra-Long Staple (ELS), from origins such as the US and Egypt. The same is hardly grown in India.
The user industry has a point when it argues that import of less than 20 lakh bales of cotton in the country’s overall annual cotton production of 330-360 lakh bales is hardly an issue; but it would surely exert a negative impact on exports. There is no evidence that import of varieties such as ELS affects the domestic market. If anything, the duty is likely to erode India’s competitiveness in the export market.