Farmers Raise Red Flag on US Trade Pact: Cotton Duty Cuts

Farm unions in Punjab have sharpened their warning to New Delhi against proceeding with a U.S. trade pact that touches agriculture, even as they celebrate forcing a rollback of the state’s land-pooling policy. At a large mahapanchayat convened by the Samyukt Kisan Morcha (SKM) in Samrala, leaders framed the moment as a hard-earned pause in domestic land aggregation but a fresh escalation on the trade front: they argue that liberalising imports of key farm goods would transmit global price volatility straight into Indian farm incomes. This apprehension is not abstract. On 19 August, the Centre temporarily scrapped the 11% import levy on raw cotton (removing Basic Customs Duty and AIDC) through end-September, a step pitched as relief for spinning and garment exporters reeling from sharply higher U.S. tariffs. Farmer groups read it differently—as price suppression arriving weeks before peak arrivals in the cotton belt. Their message is blunt: cut import protection further, and protests will scale nationally. 

The government’s defence is tied to export competitiveness. With the U.S. raising duties on Indian goods to 50% in early August, textiles—India’s most labour-intensive export sector—faced a sudden cost shock, prompting calls from mills to access cheaper, contamination-free imported cotton to keep looms running and orders afloat. New Delhi’s duty waiver was therefore framed as time-bound, “in public interest,” to stabilise domestic cotton prices and ease input costs. Yet the signal to farmgate markets was immediate: benchmark processed cotton prices were marked down by the Cotton Corporation of India within 48 hours, and local mandi sentiment turned fragile—exactly the transmission farmers feared. The political economy tension is visible: policy that cushions exporters can simultaneously undercut sown-acre risk-takers unless paired with offsetting farm-side instruments. 

This friction lands in a structurally sensitive crop. Cotton supports roughly six million Indian farmers directly and tens of millions across ginning, spinning, and apparel value chains; India remains a top global producer, accounting for around one-fifth of world output in 2024/25. Production has faltered over the decade even as consumption at mills has been sticky, turning India into a more frequent net importer in low-yield years. In that context, a sudden import-duty holiday—however temporary—can accelerate import arbitrage by mills while leaving growers exposed if the Minimum Support Price (MSP) is below realised costs or procurement is patchy. The Centre did lift cotton MSPs for 2025-26 (₹7,710/quintal for medium-staple; ₹8,110 for long-staple), but farmer groups argue the hike still falls short of the C2+50% benchmark they seek. Without credible, well-funded procurement and timely payments, MSP levels risk becoming reference prices rather than real floors during gluts. 

Against that backdrop, talk of a broader India–U.S. trade agreement is the combustible ingredient. Commerce Ministerial rhetoric about round-the-clock negotiations has revived hopes in corporate boardrooms of faster market access, standards alignment and investment flows. Farm unions hear something else: potential bindings on tariffs, subsidy disciplines, and sanitary-phytosanitary rules that could narrow India’s policy space just when climate variability and pest cycles are amplifying risk on the ground. Given the U.S. farm support architecture and the recent tariff salvos, SKM’s demand to ring-fence agriculture (and especially sensitive lines like cotton, dairy, edible oils, and pulses) is strategically coherent even if politically maximalist. The near-term lesson from the cotton waiver episode is simple: sequencing matters. Liberalising inputs for industry without simultaneously hardening income stabilisers for farmers invites backlash. 

What would a balanced path look like? First, replace blanket duty holidays with calibrated tariff-rate quotas (TRQs) that ensure mills can source specific grades (e.g., ELS cotton) at lower duty up to a transparent volume cap, with automatic review tied to mandi prices and arrivals. Second, operationalise price-deficiency payments in cotton on a rules-based trigger when farmgate prices fall X% below MSP during peak marketing months; this cushions income without distorting procurement logistics. Third, expand CCI’s decentralised, just-in-time procurement and reduce payment lags—small tweaks that massively improve MSP credibility. Fourth, earmark a compact “Cotton Resilience” fund to accelerate contamination control, high-density planting, and region-specific pest management; these raise realised lint quality, improve ginner realisations, and reduce the import quality premium that currently tempts mills offshore. Finally, in any U.S. trade chapter touching agriculture, negotiate permanent special safeguards and a snap-back clause linked to domestic distress indicators, alongside strict exclusions for the most sensitive tariff lines.

The policy hinge is not whether exporters or farmers “win,” but whether India’s trade and farm policies are synchronised on timing, instruments, and contingencies. The SKM mahapanchayat has surfaced a valid warning: if trade policy is used as a blunt tool to offset foreign tariff shocks, the incidence will land on the riskiest node of the value chain—the farm. The government’s task is to make its relief precise (TRQs, grade-targeting), time-bounded (with sunset and review), and paired with predictable income insurance at the farmgate. That is the minimal architecture for preventing every external tariff jolt from turning into a domestic agrarian flashpoint. 

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