Indian spinning mills are entering October without knowing which customs regime will apply to the cotton they order today. As of 28 September 2026, the exemption that removes the import duty on raw cotton is scheduled to end on 31 October, and no notification extending it has been issued. Reports in September say the government is weighing an extension into December. Until a notification appears, that is a possibility, not a policy.

Where the Policy Stands as of 28 September

The Ministry of Finance notified the current exemption on 30 May 2026. It covers imported cotton from 1 June to 31 October 2026 and waives both the basic customs duty and the Agriculture Infrastructure and Development Cess, which together account for the roughly 11 per cent burden mills quote as “the duty.” This site’s earlier coverage of the mechanics of that notification covers the arithmetic; the question here is what comes next.

The history matters for reading the odds. Duties were also waived from mid-August to 31 December 2025. That window was not extended, and the 11 per cent duty returned on 1 January 2026. A second waiver arrived five months later, on 1 June. The pattern so far is a series of short windows, opened when domestic supply tightens and allowed to lapse otherwise, rather than a standing liberalisation.

On 10 September 2026, ICICI Direct Research reported that the government may extend the exemption beyond 31 October, potentially through December, and described the matter as under consideration. Other outlets have carried similar reports attributed to sources. None of these amounts to a notification. The Confederation of Indian Textile Industry (CITI) has been publicly asking for something different: its chairman, Ashwin Chandran, has said that six-month windows are hard to plan a business around and has called for policy continuity on the cotton duty.

Why an Extension Is Plausible

Three pressures point toward keeping the window open.

Supply. The Cotton Association of India’s revised 2025-26 estimates put domestic pressings at 337 lakh bales against consumption of 348 lakh bales, with the import estimate raised to 60 lakh bales. A structural gap of that kind is what triggered the earlier windows.

Margins. ICICI Direct’s note put cotton yarn spreads up 47 per cent year on year, with a sequential moderation of about 7 per cent as of September. Spreads that wide suggest raw-material cost, not yarn demand, is what mills are managing, and that the duty is a live variable in their planning.

Competitors. CITI has argued for years that Bangladesh and Vietnam buy raw cotton without an equivalent levy, so an 11 per cent charge lands on Indian mills that also compete for export orders.

Why It Might Lapse

Against that sits the farmer side of the ledger. The Cotton Corporation of India begins minimum support price procurement on 1 October 2026 wherever market prices fall below the notified floor. The 2026-27 MSP is Rs 8,267 per quintal for medium staple cotton. A duty-free import stream arriving during procurement can pull domestic prices toward the floor, which is exactly when the government becomes the buyer of last resort. The current closing date falls just as the new crop arrives, and that farm-income logic does not disappear because mills would like it to.

How Mills Are Hedging

The reporting on specific company decisions is thin, so what follows describes the options open to a mill rather than claiming any named mill has chosen one.

Front-loading the clearance date

The exemption attaches to the bill of entry, not the purchase order. Cotton bought now from Brazil, the United States or Australia needs several weeks of ocean transit before customs clearance. A shipment that lands on 2 November pays full duty even if it was contracted in September at duty-free economics. Mills with a genuine import requirement therefore have a working deadline well before 31 October, and a shipment booked today may already be cutting it fine.

Splitting the book

The sensible position under an unconfirmed extension is to import only the volume that is justified with the duty in place, and treat any exemption as upside. A mill that buys its whole requirement on the assumption of an extension carries a price risk equal to the duty. A mill that assumes no extension and is proved wrong gives up a saving but keeps its margin intact.

Leaning on domestic cotton

Arrivals of the new crop and CCI’s procurement change the domestic picture from October. Mills that can match staple length and micronaire to domestic lots have more room to wait, because the alternative to imported cotton is about to get more plentiful. Mills spinning finer counts that depend on longer staple have less flexibility, and they are the ones watching the notification most closely.

Pricing the duty into forward yarn contracts

Yarn buyers and mills increasingly disagree about who carries the customs risk. Contracts that quote yarn on an assumed cotton cost should name the duty position, so that a policy change moves the price by an agreed formula instead of triggering a dispute.

What to Watch

An extension would arrive as a Ministry of Finance customs notification, and the earlier ones appeared close to the expiry date rather than well ahead of it. Buyers and sourcing teams should not treat a press report as the trigger. Before 31 October, three signals are worth tracking:

  • a customs notification amending the existing exemption, published on the CBIC site;
  • the gap between domestic cotton prices and the MSP once CCI starts buying on 1 October;
  • import contracting and arrivals data from the Cotton Association of India.

For sourcing teams at brands and importers, the practical takeaway is that yarn quotes for delivery after November carry a policy variable that a mill cannot control. Ask suppliers which duty scenario a quote assumes, and expect the answer to firm up only when the notification does.

Status as of 28 September 2026. This is a developing policy; an extension had not been notified at the time of writing.

Sources: Ministry of Finance customs notification of 30 May 2026; ICICI Direct Research, 10 September 2026; Business Standard, 30 May 2026; Cotton Association of India revised 2025-26 estimates; CITI statements.