Opinion

Three cheers to govt for not reducing import duty on chana

Rajalakshmi Nirmal | Updated on October 27, 2020

This sends a favourable price signal to the farmers. They will increase the acreage under chana in the upcoming rabi season and make good the kharif loss

With chana (gram) prices ruling high, at ₹5,000-5,100/quintal, industry lobby groups have been demanding a reduction in the import duty on the pulse crop. The import duty on chana is 60 per cent. The government has, however, rightly refused to heed to the request of the trade as it will have disastrous consequences for farmers who are all set to sow their rabi crop.

For the rabi season next year, the Centre has announced an MSP (minimum support price) of ₹5,100, an increase of ₹225/quintal over last year’s MSP. If the Centre reduces import duty to 35-40 per cent, as demanded, it will hit market prices badly. Even if NAFED (National Agricultural Cooperative Marketing Federation of India) steps in to buy chana at the MSP of ₹5,100/quintal in February/March, only 20 per cent of the farmers will benefit at the most. Others will continue to be at the mercy of the arhityas (commission agents) in the market.

If the Centre handles the policy challenge well, by striking a balance between the demands of the trade lobby and farmers, it will be a win-win situation.

How the prices moved up

In 2019-20, India produced about 11.35 million tonnes of chana, which was 14 per cent more than in the previous year. NAFED did a good job by procuring 2-2.1 million tonnes, against last year’s seven lakh tonnes, despite the Covid-19 led disruption in mandi activities. However, even that benefited only 20-25 per cent of the chana farmers; the rest had to take the market price of ₹3,900-4,000/quintal even when the MSP was ₹4,875/quintal.

In the months that followed, NAFED had yet another challenge before it — disposal of a close to 3.5 million tonnes of chana, of which about 1.7 million tonnes was carried forward from 2018-19, without disturbing the prices in the market. It is at this point in April that the Centre came up with the idea of distributing whole chana to ration-card-holding families and migrant labourers. In June, the free pulses scheme under PMGKY (Pradhan Mantri Garib Kalyan Yojana) was extended till November and that helped stabilise the market prices of chana. NAFED also did some careful planning of its Open Market Sales Scheme, selling a good portion of chana at ₹5,400-5500/quintal and saving, thereby, taxpayers’ money.

Thus, the marked rally in chana prices from under ₹4,000/quintal to ₹5,500/quintal, didn’t happen by itself; it is thanks to inclusion of chana whole in PMGKY, increased MSP procurement by NAFED and the Federation’s planned release of stock in the open market at an attractive ₹5,400-5,500/quintal.

Now, any move, including imports that would pull down market prices, will harm farmers who are smiling after many months and all efforts of NAFED and the Centre will go in vain.

If the Centre holds on to its stance of not reducing the import duty, farmers will see it as a favourable price signal. They will increase the acreage under chana in the upcoming rabi season and make good the kharif loss — this will also dispel the illusion of shortage in chana supplies created by the trade channel.

There would thus be no need to reduce import duty and get Kabuli chana, or yellow peas, from Australia. Policymakers have to note that if the farmers have to receive the MSP of ₹5,100/quintal from traders next season, the market price has to scale up to at least ₹5,900-6,000/quintal. This may not happen if imports are allowed now.

Published on October 27, 2020

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