India - Govt may Trim Import Duty on Cotton

The government is likely to snip import duty on cotton as part of a package to sew up fiber costs for local cloth mills. This package would be in addition to allowing cotton imported at zero duty from Africa to compete with Indian cotton.

The government is exploring a reduction in import duty from 10% to 5% and removal of special additional duty of 4.5%. It may also remove export incentives such as the 1% draw back on packaging material. Zero duty import of cotton will be permitted from the least developed countries of Africa. Textile mills believe a duty cut will exert psychological pressure on the market and deter any speculative hoarding, especially by exporters.
African cotton is 4 cents more expensive than Indian cotton right now. Plus, there is an 8 cent duty in India. If this duty is zero, African cotton would become quite competitive here.

Meanwhile, there is little evidence that India could be running out of cotton soon.

The USDA forecasts 2007-08 to show lower production, consumption, and trade of cotton in the world market. Production will be lower in China, Brazil, and Turkey, but higher in Pakistan. World consumption is likely to be lower mainly in China, India, and Turkey, due to weaker than anticipated textile demand combined with higher cotton prices relative to polyester.

Source: Economic Times