The Hindu Business Line : Pulses imports need no subsidy

Mumbai April 25 The Union Government's reported decision to grant a 15 per cent subsidy to parastatals and public sector trading companies for importing large volumes of pulses is an aberration that is not justified and needs an urgent review.

Conceded that the country is chronically short of pulses, in addition to several other commodities; supplies have to be augmented through imports. Pulses imports are absolutely free - under open general license and no customs duty.

In its anxiety to be seen as protecting consumer interest and controlling inflation, the Centre has unwittingly sent out a strong bullish signal to the world pulses market about intention to import as much as 15 lakh tonnes through public sector agencies.

As if to compound naivety with indiscretion, it has decided to grant a subsidy to public sector importing companies in order to make good possible losses they may incur in the import business. The Pulses Importers Association has objected to grant of subsidy and demanded that it be extended to the private trade also. This plea is not justified either.

In a free trade regime and in an environment of economic liberalisation, there is no reason to treat Government parastatals differently. Corporates such as STC, MMTC and PEC are well-established trading houses and must do business on merits. Admittedly, these companies are Government-owned companies and enjoy certain Governmental patronage.

However, when they discharge commercial functions (such as importing and trading pulses) they cannot be and should not be treated differently from say private sector importers. There is no justification to treat the Government agencies preferentially or any differently from the private trade.

Both these categories of importers are in the same market, trading in same or similar commodities with common sources of supplies and consumers. Any distinction would be artificial and discriminatory. Equals cannot be treated unequally.

Indeed, there are commercial risks in granting subsidy on pulses import. Far from advancing competitiveness and efficiency, the subsidy regime will mean supporting inefficient traders over others. This must be avoided.

Despite a free trade regime, open market prices have remained firm for various reasons including omissions and commissions of policymakers for long years. Pulses — poor man's protein — did not receive the kind of policy support that was bestowed on fine cereals.

While economic growth ensured income generation and demand for food products including pulses, markets were liberated from controls and restrictions.

Utter indifference to raising domestic production has resulted in shortage and dependence on imports.

Opening up the market without corresponding and vigorous efforts to create conditions for sustained growth of farm production is sure to result in demand-supply mismatch and unsettled market conditions that may hurt the interests of stakeholders. The point is policymakers must assume responsibility for ignoring supply side issues for long years.

There can be no objection to the Government allowing a greater role to public sector companies. Indeed, they should be given more work. For instance, public sector companies can begin to undertake procurement of pulses at market rates. This will help the marketability of the produce and help growers.

Supply of pulses through public distribution system should be initiated.

The poor are the worst hit because of high prices. They need to be supported. Government companies can play a role in this as part of corporate social responsibility.

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