Amid Trump's tariffs, Centre to ramp up MSP cotton buys to shield farmers

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The Centre will ramp up purchases of cotton at federally-fixed minimum support prices or MSP to cushion farmers from falling local rates, following the government’s decision to waive duty on imports of the fibre and beef up an apparel sector bracing for Trump’s 50% tariff.

A worker feeds raw cotton into an opener machine at a processing facility in Amritsar (AFP)

Already, farmers are battling price pressures because textile manufacturers prefer to import cheaper short-staple fibre because of higher domestic rates. One of the country’s largest employers, the textile industry itself had been pleading the Union government for a duty reprieve due to falling margins and a knock-on impact of the pandemic.

The Centre, having to prop up the labour-intensive apparel industry on the one hand and cotton growers, on the other, has directed the state-run Cotton Corporation of India (CCI) to prepare for large purchases and buy as much quantities as growers bring to its procurement centres, an official said. Farmers tend to rely on the CCI for floor prices, whenever market prices crash.

On August 28, India extended its 11% import-duty exemption, which includes an agricultural cess, on cotton import till the end of December. The tax break was initially applicable between August 19 and September 31.

By temporarily halting the levies, the government aims to stabilise inflation in products, such as finished garments, ease a raw-material crisis and protect small and medium enterprises, a statement on August 19 official said.

“We are ready to buy as much as farmers want us to and the CCI is there to help cotton growers,” Lalit Kumar Gupta, managing director, CCI.

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For the 2025–26 season, the Centre has set an MSP for the popular medium-staple cotton at ₹7,710 per quintal (100 kg), up ₹589 from the previous year. Importers say the landed costs of fibre sourced from abroad are between ₹5000-6200 per 100 kg.

Global apparel buyers have cut down on new imports from India after Trump’s hefty tariff and analysts say firms could shift to Bangladesh or China, where tariffs are lower. The CCI is ratcheting up its purchasing power centres to more than 500.

Domestic cotton production, battered by pest attacks and falling efficacy of GM cotton, itself has dived to a 15-year low of 25 million bales (of 170 kg each) and since it is priced higher than imported fibre, farmers are expected to find it tough to get profitable rates.

In the 2024-25 cotton season, the CCI bought slightly over 10 million bales from producers.

India imports substantial quantities of cotton, mostly from the US and Australia, despite being the world’s second largest producer at 25 million bales (170 kg), as domestic prices have been consistently higher than global rates.

India’s imports of cotton in 2024-25 had risen to 2.71 million bales against 1.52 million bales in FY24 and 1.46 million bales in the year before that.

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