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G. Chandrashekhar

Tariff sops for ASEAN: Doubts over domestic preparedness

Washington , Aug 21

Are policymakers in India playing a double game? Is the policymaking process transparent? Is there well-structured and meaningful stakeholder consultation? With respect to policy decision, is the explanation given to domestic stakeholders at variance with what is being fed to the international media? These are some of the questions that haunt stakeholders and others who are concerned about the recent government initiatives to slash rates of customs duty on sensitive items, including palm oil, tea and pepper.

Succumbing to pressure?

It is not all. The country is possibly succumbing to international pressure to open up its market for goods from the Asian neighbours, without driving the discussion towards a reasonable quid pro quo.

If one went by recent reports in international media, the justification for offering tariff concessions on even sensitive products is to restart the stalled trade talks of South-East Asia. As admitted by a senior trade official, tariffs on four sensitive agricultural imports will be cut.

According to reports, tariffs on refined palm oil will be reduced to 60 per cent (from 80 per cent) and on crude palm oil to 50 per cent (from 70 per cent). On tea, duty will be slashed from 100 per cent to 50 per cent and on pepper from 70 per cent to 50 per cent in order to encourage trade within the ASEAN.

Recently, the Union Government cut customs duty on refined and crude palm oil by 10 percentage points. The reason given was rising international vegetable oil prices.

It is common knowledge that world's largest palm oil producer Malaysia has been lobbying India for a substantial cut in palm oil import tariffs, which are much higher than tariff on soyabean oil at 45 per cent.

Palm oil duty

One of the most contentious issues in ASEAN trade negotiations has been the rate of duty on palm oil, a Commerce Ministry official had admitted. India managed to withstand international pressure so far, but looks ready to succumb now.

There is reason to believe, after being at the forefront of WTO negotiations on agricultural subsidies, India is keen to assume leadership position in regional trade talks by offering all sorts of concessions to its neighbours ahead of the ASEAN economic ministers' meeting scheduled to take place shortly.

But in its overzealousness to project itself as a `big brother' in a hurry, India may well be hurting its domestic interests.

The manner in which Indian policymakers are now handling the trade negotiations reeks of lack of adequate homework and desire to rush into talks with partners without assessing domestic preparedness. It was not long ago that the government came out with a variety of measures to safeguard the interest of tea and pepper growers.

Low prices of these two commodities for an extended period had led to unsettled conditions among growers. The Government had to step in and grant a series of relief packages. The sector is yet to fully recover.

Plantation sector

Nothing much has changed in the last two years in the domestic plantation sector to warrant an opening up of the market. In terms of production and quality enhancement as well as marketing, both tea and pepper have witnessed little improvement.

Without efforts to strengthen the domestic sector, opening up the market can potentially subject growers here to unfair competition, hurt their incomes and not advance their interest at all. The government is duty bound to explain what specific measures it has taken so far and is likely to take in the future to make the plantation sector competitive.

Oilseeds

Same is the case with palm oil imports. India is a large producer of oilseeds and a large importer of vegetable oils to meet domestic needs. Oilseeds production in country has stagnated for long years.

That the oilseeds-based sector continues to languish for want of policy support and holistic approach to addressing structural issues that stymie growth is one of the major failures of the Government, in general, and the Agriculture Ministry, in particular.

Endless debate

Trade negotiations by their very nature are an ongoing exercise. The issue of agricultural subsidies has been debated endlessly by WTO members; but a positive result has been elusive. Nothing has come out of the protracted trade negotiations. Meanwhile, developed nations continue to protect their domestic farm interests.

India is, perhaps, the only large agrarian economy keen to open up its market without efforts to strengthen its domestic production base and markets.

While the Commerce Ministry is engaged in international trade talks, it is the responsibility of the Agriculture Ministry to formulate and implement policies that advance domestic stakeholder interests. If the Government is rushing into granting tariff concessions, it casts a shadow on the consultation process within the government itself - between the ministries of commerce and agriculture, for example.

More Stories on : Agricultural Policy | Foreign Trade | Commodities | Excise and Customs

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