The levy of import duty on cotton has led to a distortion in Indian cotton prices.

The trade and industry finds it difficult to import the raw material and has asked for the removal of the import duty which is seen as necessary to create a stable price environment and to compete internationally. Since the industry has to compete with other textile producing nations it is losing orders because of the difference in prices.

In such a scenario, the industry says it is difficult for to bear the distortion in prices created by the 11 per cent import duty. Since Indian cotton prices are higher than world cotton prices by about 15 per cent availability of cotton for the domestic textile industry has been severely impacted. At present, the Indian textile industry functions at only 50 per cent to 60 per cent capacity due to high raw material prices and the lack of a level playing field.

Import duty removal is expected to play a crucial role in determining the competitiveness of the value chain in immediate future order bookings for apparel exports. This is one of the primary reasons for the decrease in the export of cotton yarn, cotton, and cotton fabric.