Cotton imports spell disaster for farmers

ON August 18, the Central government announced the removal of 11 per cent import duty on cotton until September 30. Barely 10 days later, it extended the exemption till December 31. This has come as a blow to the farmers of the country as cotton is an important crop, with more than 60 lakh farmers cultivating it. It is also a key source of crop diversification in states like Punjab.That the decision has come at the time of harvest is a recipe for disaster as it would lead to a crash in the cotton prices, causing distress to the growers. This duty was an important tool to shield the Indian farmers from artificially low-priced imported cotton from developed countries, especially Australia and the US. But under the US threat of tariffs and pressure from the textile sector, the government has sacrificed the interests of the most vulnerable group of farmers.Cotton production has been consistently shrinking in the country. It fell from 6.56 million tonnes in 2014-15 to a mere 5.50 million tonnes in 2023-24. In Punjab, the area under cotton cultivation which was 7.42 lakh hectares in 1998-99, shrank to below one lakh hectares in 2025-26. The government decision threatens the future of this key alternative crop for diversification.Cotton imports were already at record highs even before the suspension of import duty. They had surged 107.4 per cent in a year: from $579.2 million in 2023-24 to $1.20 billion in 2024-25. With the duty suspended, the imports will only grow, driving prices further down. In fact, cotton prices have been declining since the duty was lifted, signalling acute distress for farmers.The present selling rate of the Cotton Corporation of India (CCI) is around Rs 56,000 per candy of 356 kg, while imported cotton after duty removal is estimated to cost around Rs 50,000 per candy. For the current harvest, the government has hiked the MSP by 8 per cent. It was supposed to allow farmers to realise around Rs 61,000 per candy, but with cheaper imported stock available, they will be fortunate to come anywhere close to that figure. The farmers might now be discouraged from sowing the crop.The CCI, which has been procuring cotton at MSP to stabilise the market, is likely to find its role undermined as cheaper imports will make its stock unattractive. The MSP for cotton currently stands at Rs 7,710 per quintal, while the C2+50 per cent cost of production is estimated to be around Rs 10,000 per quintal, leaving the farmers with a shortfall of Rs 2,300 per quintal. The domestic market prices are already well below the MSP, fluctuating between Rs 5,500 and Rs 6,500 per quintal. The latest decision would further widen this gap.The cost of this policy would be particularly visible in the cotton regions of Punjab, Telangana and Maharashtra, which are already among the most indebted agricultural areas in the country. In Punjab alone, farmer debt in 2024 stood at Rs 1,04,064 crore, averaging Rs 2.71 lakh per account. Its cotton belt, ie the south-west, has already been suffering from crop failures due to biotic and abiotic reasons.Almost all of the cotton belts of the country account for the highest rates of farmer suicides. In the Marathwada region, 269 suicides were recorded in the first three months of this year. The policy change might prove to be a death knell for many more farmers.The scale of the impact is immense. India could end up becoming a net cotton importer if the cheaper cotton from other countries floods the market, as the case is with oilseeds and pulses, where the country spends around Rs 2 lakh crore on importing these crops annually. India's production costs are also structurally higher than those of competitors like Brazil and Australia, which allows these countries to export cotton to India at far lower rates.What makes the situation worse is the global imbalance in subsidies. In 2024, the US handed out $9.3 billion in subsidy payments to its farmers for commodity crops. The recent tax bill of the US is set to provide them with $60 billion over the next decade in subsidies and direct payments. This disparity ensures that American cotton enters the global market at artificially low prices, undercutting Indian farmers, who already operate on thin margins.The arrival of subsidised imports in such a fragile context could accelerate the decline of India's cotton economy.Another major setback is the 50 per cent tariff levied on Indian exports by the US, which is a huge importer of textile goods from India. It is believed that with this, the purchase of cotton yarn has dropped by half of the previous level. With the textile business slowing down due to these tariffs, the demand for cotton was already set to be lower, even with import duty in place.The irony is that this decision came days after Prime Minister Modi assured the farmers that the government would not compromise their interest at any cost. On the contrary, the government has removed import duty in the name of relief to the textile industry, putting the future of millions of cotton growers in the dark. Already grappling with high costs of cultivation, falling acreage, mounting debt and an uneven global subsidy regime, farmers face yet another setback.The measure also raises larger questions about policy direction. Instead of strengthening domestic production and addressing the structural issues faced by cotton cultivators, such as pest outbreaks, lack of assured procurement and inadequate support prices, the government has chosen a short-term fix that benefits other countries, while putting its own farmers at a disadvantage. Unless the decision is reversed, it risks discouraging cotton cultivation altogether, worsening rural indebtedness and deepening agrarian distress.Sukhpal Singh is Chairman, Punjab State Farmers’ and Farm Workers’ Commission.

Cotton imports spell disaster for farmers

Sukhpal Singh

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