Commodities

Indian traders do ‘advance booking’ of lentil for import

G Chandrashekhar | Updated on April 27, 2021

Actual crop size lower than government estimate, limited stocks, tightening supplies have combined to elevate prices

In anticipation of a reduction in customs duty on masur (lentils), the ‘big boys’ of the Indian pulses trade have already booked as much as five lakh tonnes of Canadian and US origin lentils to be shipped out to India.

The market knows who the big boys are.

Red lentil has been contracted for at rates between $705 and $720 a tonne (cost and freight) for delivery at Indian port, while some cargo of green lentil has been booked at between $800 and $860 (c&f) .

All the cargo is said to be moving to Canada’s Vancouver port from where it will sail to India as soon as the government announces duty reduction or even duty waiver.

Lentil, a Rabi crop, was harvested last month. The Agriculture Ministry’s production estimate of 13.5 lakh tonnes (lt)is seen as somewhat overstated. The market believes the crop size is lower at 12 lt.

This is reflected in prices. Compared with the minimum support price of ₹5,100 a quintal, the current rates are 10-12 per cent higher. This has raised hopes of a duty reduction like it happened last year. Indeed, top quality Canadian lentil is already quoted in some Indian trading centres at ₹6,300 a quintal.

Food inflation

Conditions for easing of restrictions on pulse import have been developing in the last couple of months. Actual crop size lower than government estimate, limited stocks with official agencies, tightening supplies and improved market sentiment have combined to elevate prices.

While the current market conditions are sure to encourage pulse growers in the upcoming Kharif planting, New Delhi is worried about food inflation, which in turn has strengthened the belief that the rate of customs duty will be reduced.

Market participants are sanguine this year will see a repeat of 2020 when the government reduced customs duty on lentils from 30 per cent to 10 per cent ad valorem on the recommendation of the RBI. India imported well over 8 lt of lentils last year following the duty reduction.

In its latest report released on April 26, the RBI has warned of inflation pressures if the supply chains are disrupted because of the second wave of infection and regional lockdowns.

US duty

As part of the 2021-22 Budget, the basic customs duty on all pulses including lentils has been fixed at 10 per cent. Additionally, there is a levy of Agriculture Infrastructure Development (AID) Cess. On lentils, AID cess is 20 per cent. However, the US origin lentils will attract a retaliatory duty of a further 20 per cent.

To avoid this additional duty on US origin lentils, some resourceful importers move the US lentils to Canada to be shipped out from Vancouver port so as to be able to declare the cargo as Canadian origin, a suspicion expressed by a US-based top industry player last year.

The writer is a policy commentator and agribusiness specialist. Views are personal

Published on April 27, 2021

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