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India needs to allow duty-free imports of cotton as higher raw material prices have reduced textile mills' capacity use, a leading trade body told the government on Wednesday.

Cotton imports into India, the world's biggest producer of the fibre, attract 11% duty, which makes the imports financially unviable, the Cotton Association of India (CAI) said in a letter to Textile Minister Piyush Goyal.

India cotton is nearly 15% more expensive than cotton of other origins, and the higher price has eroded the competitiveness of textile industry and reduced capacity utilization to 50%, the letter said.

"This (scrapping of duty) will help our textile industry to perform with optimum capacity," it said.

Indian traders are struggling to export cotton despite higher production as farmers are delaying the sale of their harvest hoping for higher prices in coming months, industry officials told Reuters.