Import duty proposal on pulses lacks merit

In a move that is sure to raise the hackles of pulses traders and draw loud protests, the Ministry of Agriculture has reportedly proposed imposition of customs duty to the Department of Revenue, Ministry of Finance, on the ground that some imported pulses such as urad and tur are cheaper than domestic produce. Since 2006, pulses imports are permitted duty-free in order to meet domestic shortfall and contain rising prices.

The Agriculture Ministry’s rationale for proposing a tax on imported pulses is specious. It lacks merit for a variety of reasons, not the least of which is that our country is still far from being self-sufficient in pulses production. No doubt, from 14-15 million tonnes (mt) till 2009-10, production in the last three years has gone on to a higher plane of 17-18 mt. Yet, imports are necessary to fill the supply gap as demand too has been rising, driven by rising incomes and population pressure. Rising rural incomes through various welfare programs help generate consumption demand for a wide range of food products including pulses.

At the same time, the per capita availability of pulses is still modest at about 15 kg, while nutritionists recommend not less than 20 kg per person per year. The poor get to consume much less than what the per capita number suggests. Given that pulses are the most economical vegetable protein, the attempt of the policymakers should be to ensure that these legumes are made available at really affordable prices, especially for the poor.

More importantly, food inflation is still high; and high food prices hit the poor the hardest. One cannot fight pervasive malnutrition and under-nutrition (primarily protein and calorie deficiency) across the country by taxing basic foods that provide nutrition. If anything, the government must procure pulses and sell through the public distribution system at subsidised rates in order to advance nutrition security.

It is intriguing that the Agriculture Ministry has proposed levy of customs duty on imported pulses. The first advance estimate of 2013-14 crop production pegs pulses harvest (kharif) at a mere 60 lakh tonnes, well below the target of 70 lakh tonnes and marginally up from 59 lakh tonnes of kharif 2012. This small increase is despite a six-lakh-hectare increase in pulses acreage.

The Ministry has commendably supported pulses growers by raising the minimum support price season after season in the last three years. To strengthen the support, it should now begin to use one more policy instrument in its hand, and that is commencing price support operation in the event farm-gate rates fall below the MSP. Allowing pulses export, even under a limited ceiling will help too.

There is absolutely no guarantee that imposing an import duty on pulses will boost prices in a way that would encourage growers. Far from it, traders who take speculative positions in the market will benefit. Already food inflation is high. A weaker rupee (from 54-55 to 61-62 to a dollar) by itself makes imported pulses expensive and acts as an indirect form of customs duty. There is no case for import duty on pulses at this point of time as it would be perceived anti-consumer, and not pro-farmer.

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