Move to levy import duty on pulses ill-advised

Reports going around the marketplace that imported pulses may be subjected to customs duty have unnerved the market participants while speculators are having a field day. Cash-rich traders have begun to build inventory.

The Commission for Agricultural Costs and Prices willy-nilly set the cat among the pigeons by reportedly recommending a 10 per cent customs duty on imported pulses.

Apparently, supporting tur-arhar or pigeon-pea prices in the domestic market seemed to be the objective. Of course, it is for the Ministry of Finance to take a call on accepting the recommendation. But given that food inflation is still high and retail prices of pulses are still at elevated levels, revenue officials are sure to be rather wary of making this essential food commodity more expensive by taxing it.

The opinion over the desirability of imposing customs duty on imported pulses may be divided; but ground realities are such that taxing pulses at this point of time would be counter-productive rather than advance farmers’ interests. Certain aspects deserve close scrutiny.

First, our country is far from self-sufficient in pulses production and import dependence is projected to increase in the coming years. Although pulses have broken the 14-15 million tonnes production barrier, we seem to have got trapped at the 17-18 mt range last three years.

No wonder, our pulses imports aggregate over three million tonnes a year; and yet open market prices have not shown any significant decline. The per capita availability continues to be rather low at about 14 kg or so.

By imposing say a 10 per cent customs duty there is sure to be a general increase in pulses prices, making this protein-rich food even more expensive than at present, especially for the poor.

The duty if levied will be largesse from the Government to the traders holding large stocks as they are sure to benefit by reaping windfall price gains; but there is absolutely no guarantee that farm-gate prices will be supported or growers will benefits.

However, what is guaranteed is that consumer interest will be adversely affected. Importantly, a steadily weakening rupee (over Rs 60 to a $ currently) has already made imported pulses more expensive.

The policymakers are most unlikely to want to risk another round of price rise in any essential food commodity. If the farm-gate price of any pulse crop has fallen below the minimum support price, the most logical thing to do would be for the Government to intervene.

Indeed, it is the duty of the designated agencies to step in and commence price support operations.

Essentially a kharif crop, tur/arhar production in the country is about three million tonnes representing less than a fifth of our total pulses production or 15 per cent of our total pulses consumption.

Annual moong production is about 1.2 mt. It is important to remember that fiscal impost such as customs duty should be used sparingly and for solid reasons of larger public interest.

It would be naïve to assume that customs duties alone can boost agricultural production or support growers. We need to address the structural issues of pulses cultivation.

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