India scraps cotton import duty for five months to aid textile exporters

India has scrapped customs duties on cotton imports for five months, the government said on Saturday, as it seeks to boost supplies of contamination-free natural fibre for textile exporters amid strong overseas demand for yarn.

The easing of import restrictions by the world's second-largest cotton producer is likely to lend support to global prices but is unlikely to trigger a surge in purchases as the rupee's depreciation has made imported cotton slightly more expensive than domestic supplies.

The current 11 percent import duty will be suspended until October 30, the government said in a statement.

India's textile sector, like others, is under pressure from rising input costs as supply chains are disrupted by the Iran war.

The measure is expected to support domestic producers, particularly small and medium-sized firms, by improving cotton availability, the government said.

However, industry officials said Indian cotton is currently the cheapest in the world and that ample supplies from this year's crop are available domestically, which is likely to limit imports.

"At current price levels, imports are not economically attractive," Vinay Kotak, president of the Cotton Association of India, told Reuters.

"Export-oriented mills need contamination-free cotton and, to meet that requirement, around 600,000 bales could be imported during the duty-free import window."

The cotton is likely to be sourced from Australia, Brazil, the United States and Africa, which have surpluses, industry officials said.

India last year allowed duty-free cotton imports from mid-August through the end of December, helping drive imports to a record 4.7 million bales in the current marketing year, which began last October 1.

Cotton is largely grown in rain-fed areas in India, and any disruption to monsoon rains from an El Nino weather pattern could reduce output from the new crop being planted from June and boost import demand, said a New-Delhi-based dealer with a global trade house.

"In that scenario, the government could extend the duty-free import window beyond October, as it did last year," he said.