Mumbai: The government has abolished the 10 per cent customs duty and the four per cent special additional duty on import of cotton, following a sharp rise in its prices in the domestic market.
''The customs duty on all types of cotton imports has been abolished along with special additional duty. Besides, drawback benefits on export of raw cotton have also been withdrawn," a finance ministry official said.
The move is aimed at increasing supplies to local textile mills and bringing down soaring prices. The exemption in custom duties is effective 8 July, the finance ministry said.
Yarn mills had, meanwhile, announced a token strike to press their demand for abolishing customs duty on cotton imports and regulation of exports.
''Since the strike call had already been given, workers have not turned up," deputy chairman of Southern India Mills Association J Thulasidharan said while welcoming the decision of the government.
Cotton prices in the country have gone up by over 42 per cent since January this year, adding to cost of textile industry.
Cotton prices in Vidarbha region have touched record highs this season with traders offering Rs3,600 per quintal against the normal price of Rs2,200 per quintal, market sources said.
Textile industry has been demanding a reduction in import duty and curbs on cotton exports as domestic supplies were not enough to meet demand. Cotton prices in India have risen four times faster than the global benchmark.
Cotton production in the country is expected to reach 35 million bales in the year starting October, compared with about 31.5 million bales this year, according to projections made by the Cotton Corporation of India Ltd.
With farmers shifting more area to food crops and a reduction in the area under cotton, the ginning industry expects a sever supply crisis due to lower production of cotton.