Agri Business

Indian buyers face charge of reneging on deals as pulses turn cheap

G Chandrashekhar | Updated on February 22, 2018


After imposition of quantitative restrictions on import of select pulses in August last year, followed by levy of customs duty on others (chickpea, lentil), Indian importers have committed large-scale contract defaults, overseas suppliers have alleged. Default was the constant complaint heard from suppliers from different countries at the recently concluded Pulse Conclave in New Delhi. Without doubt, the defaults have been triggered by a sharp price collapse in the domestic market, in the wake of record production in 2016-17 (23 million tonnes) and equally large harvest expected in 2017-18.

Pulse prices have fallen well below the specified minimum support price in most cases. Importers faced the risk of incurring heavy financial losses if they had honoured the contractual obligation.

Sellers complained that many buyers here deliberately chose not to accept the shipping documents on arrival of the cargo. To be sure, most of the import business in pulses is done on CAD (cash against documents) terms; and often, the seller finds himself at the mercy of the buyer when the cargo reaches the destination port.

While answering a question in Rajya Sabha on December 27, 2017, the Minister of State for Commerce said, “No individual foreign exporter has approached the government for help on account of reneged contracts by Indian pulses importers. However, representations were received with reference to pulses import from Myanmar, Tanzania and Mozambique through our Embassies / High Commissions. Also no information is available about any country taking action against Indian importers.”

Consular Corps of two countries confided to this writer that they had written to the government about contract defaults.

Clearly, default of international contracts can no more be treated as an issue between two parties. Such defaults sully the image of the country and bring disrepute to the trade, remarked representatives of trading houses. The issue of reneging on contracts once again brings to the fore the urgent need to monitor/regulate foreign trade in pulses.

At the moment, there is no system for monitoring import and export trade through contract registration and arrival information. The government has little idea on quantities and varieties have been contracted for import, at what price and when the cargo will arrive. Even without these basic information, decisions are being taken to change trade and tariff policies. No wonder, the policymakers merely react to situations rather than proactively take steps to regulate the trade.

Failure to track contracts, and regulate the trade has left the policymakers clueless about timely intervention and has created hardship not only for domestic growers and traders, but also for overseas suppliers. Stakeholders are now demanding transparency and predictability in Indian policymaking. It is necessary to heed their voice .

The writer is a global agribusiness and commodities market specialist. Views are personal

Published on February 22, 2018

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