Daily Current Affairs for UPSC : 19 August 2025/Agriculture Infrastructure and Development Cess (AIDC):

Why in News? The Finance Ministry has announced the elimination of the 11% import duty on cotton, including the Agriculture Infrastructure and Development Cess (AIDC), with immediate effect from August 19, 2025. The waiver will remain in force till September 30, 2025.

This move comes against the backdrop of steep U.S. tariffs of up to 50% on Indian textile exports, which threatened to make Indian products uncompetitive in one of India’s largest export markets.

Relevance : Pre & Mains

Prelims :  AIDC/AEPC

Mains  : GS 3 (Economy)

Key Points:

Government’s Decision:

• Import duty on cotton and AIDC scrapped temporarily in the public interest.
• Aim: Help domestic cotton prices align with global rates and safeguard India’s textile exports.

Impact on Textile Industry:

• As per Apparel Export Promotion Council (AEPC), Textile sector was facing one of the hardest hits due to U.S. tariffs, as the U.S. is India’s biggest market for Ready-Made Garments (RMG).
• Major exports to the U.S. include cotton T-shirts (9.7%), women’s/girls’ dresses (6.5%), and cotton garments (5.4%).

Export Significance:

• The top three Indian exports to the U.S. (cotton-based) account for 10%, 36%, and 20% of U.S. imports in those categories.
• Apparel and textile exports form 65–70% of India’s sales in the U.S.
• S. accounts for 60% of India’s RMG exports and 50% of total apparel exports.

U.S. Tariffs:

• On July 30, 2025, the U.S. imposed a 25% reciprocal tariff on Indian goods.
• President Trump further announced an additional 25% duty on Indian textiles, effective August 27, 2025.

Industry Reaction:

• Confederation of Indian Textile Industry (CITI) welcomed the relief but stressed it is temporary.
• CITI also demanded government intervention to ensure raw cotton availability at fair prices.
• Concerns: Competing countries like Bangladesh (25% duty-free), Vietnam (25%), Indonesia (25%), and Cambodia (25%) would gain an edge over India.

About Agriculture Infrastructure and Development Cess (AIDC):

• AIDC was introduced in the Union Budget 2021-22.
• It is a type of indirect tax (cess) imposed on the import of certain goods as well as some excisable products produced in India.
• The revenue collected through this cess is specifically earmarked for financing agriculture infrastructure and for the development of rural areas.

Key Features:

• Objective: To create and improve farm infrastructure, enhance the logistics and supply chain, and ensure better farm-gate prices for farmers.

Nature:

• It is a cess, not a regular tax.
• The revenue from AIDC does not go into the Consolidated Fund of India but into a dedicated fund for agricultural development.

• Levy: Applied on imports of certain goods and some domestic excisable items.
• Customs Duty Adjustment: To avoid making imports costlier, the basic customs duty is reduced on certain products where AIDC is imposed, so that the overall tax burden does not increase disproportionately.

Products Covered under AIDC:

• Petroleum products (e.g., petrol, diesel).
• Alcoholic beverages.
• Crude palm oil.
• Coal and lignite.
• Fertilizers.
• Certain agricultural imports (like cotton, before the recent exemption till September 30, 2025).