Govt extends duty-free imports of cotton till Dec 31: Here is how Welspun Living, Vardhman Textile and other textile stocks are faring

The government on Thursday, August 28, extended the duty-free import of cotton by three more months untill December 31 to support textile exporters facing steep 50% tariffs in the US.

Earlier, on August 18, the Finance Ministry had allowed duty exemption on cotton imports from August 19 till September 30.

In a statement on Thursday, the ministry said, "In order to support exporters further, the Central government has decided to extend the import duty exemption on cotton (HS 5201) from 30th September 2025 till 31st December 2025."

This includes exemption from both the 5% Basic Customs Duty (BCD) and the 5% Agriculture Infrastructure and Development Cess (AIDC), as well as a 10% Social Welfare Surcharge on both, which led to a cumulative 11% import duty on cotton.

The move is expected to lower input costs across the textile value chain, encompassing yarn, fabric, garments, and made-ups, and provide much-needed relief to manufacturers and consumers alike.

Shares of Indian textile and garment firms were seen under pressure on Thursday. Several Indian textile stocks, such as Welspun Living (-1.14%), KPR Mills (0.52%), Indo Count Industries (-1.12%), Alok Industries (-1.08%), Kitex Garments (-5%) and Vardhman Textiles (-0.85%), were under pressure.

Effective August 27, the US has imposed a 50% duty on Indian goods, including textiles, gems and jewellery, and leather.

The duty exemption would enhance the availability of raw cotton in the domestic market, stabilise cotton prices, and thereby reduce inflationary pressure on finished textile products.

It would support the export competitiveness of Indian textile products by lowering production costs and protecting Small and Medium Enterprises (SMEs) in the textile sector, according to the government.

The US is a key market for Indian ready-made garment exports. America accounts for 33% of India's total garment exports in 2024.

In 2024-25, India's exports to the US from this sector include apparel-knitted ($2.7 billion), apparel-woven ($2.7 billion), and textiles and made-ups ($3 billion).

Mithileshwar Thakur, Secretary General, AEPC (Apparel Export Promotion Council), said the textiles sector, with exports of $10.3 billion, is one of the worst-impacted sectors.

"The industry was reconciled to the 25% reciprocal tariff announced by the USA, as it was prepared to absorb a part of the tariff increase. But the additional burden of another 25%...has effectively driven the Indian apparel industry out of the US market, as the gap of 30-31% tariff disadvantage vis-a-vis major competing countries like Bangladesh, Vietnam, Sri Lanka, Cambodia and Indonesia is impossible to bridge," he said.