Agri Business

Agri policy changes: Too little, too late

G Chandrashekar | Updated on January 15, 2018

Over the past few days, the Centre has announced several trade and tariff policy changes regarding agricultural commodities. But, it is clearly a case of ‘too little too late’. Imposing customs duty on imported tur/arhar is a case in point.

In a major trade policy change, the government has allowed export of edible oil in bulk in addition to consumer packs. Following a large harvest of kharif oilseeds four months ago, groundnut and soyabean prices have been ruling rather low (often close to minimum support price, or MSP), creating utter disillusionment among growers.

The decision to permit edible oil export in bulk ought to have been taken at least three months ago. It is unclear what held it up for months. By now growers have marketed a substantial part of the crop harvested as far back as October 2016, and the primary producer is unlikely to reap the benefit of higher market prices following liberalised export.

Who is responsible for the delayed decision that goes against farmers’ interest is something to be answered by the government. In any case, the country continues to import massive quantities of edible oil (13-14 million tonnes) to meet domestic shortages. These low priced imports also contribute to depressing domestic oilseed prices.

When the import window is fully open, it is illogical to keep the export window shut. Mercifully, New Delhi has woken up now and liberalised export; but the damage is already done.

The case of imposing 10 per cent customs duty on imported tur/arhar is even worse. The country has harvested a record 4.7 million tonnes tur/arhar crop. Farm gate prices have been ruling well below the MSP of ₹5,050 a quintal from the time of harvest that started four months ago.

The government’s procurement operations have been tardy. Growers who rose to the occasion to expand acreage and harvest a record crop have genuine reason to be upset with the government.

In addition to the record harvest, large volumes of imports at low prices (as low as $600 a tonne or ₹4,200 a quintal) have been taking place. New Delhi has no mechanism to monitor imports and has no clue about market dynamics.

The levy of 10 per cent import duty on tur/arhar at this point in time is a clear case of ‘too little too late’. Again, someone in the government must own up responsibility. Like opening up edible oil export in bulk, what prevents the government from opening up pulses export? Removing export restrictions and storage limits was the most logical policy measure available to the government for the last several months.

The only sensible and timely decision the government took recently was to discourage low priced wheat imports by re-imposing 10 per cent customs duty. The author had argued in these columns a couple of months ago for a review of the duty-free import policy in March on the basis of crop prospects. The country is harvesting a large crop, though it may not be as much as 96.6 million tonnes as the Centre claims; but it is still large enough.

Commercial intelligence

Reducing the import duty on sunflower seed to 10 per cent is a positive step; but given international prices, availability and price parity the volume of import (raw material for the domestic processing industry) is expected to be rather limited.

Some of the trade and tariff decisions that have come rather late betray poor commercial intelligence within policy making circles.

There is a dire need to shore up market intelligence within the ministries of finance, commerce, agriculture, food and consumer affairs.

(The author is an agribusiness and commodities market specialist. The views expressed here are personal).

Published on March 30, 2017

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