The Hindu Business Line : Pulses duty cut won't benefit consumers

ON the face of it, the Food Ministry's reported demand for halving the customs duty on pulses import from the present 10 per cent would appear to be in the interest of consumers; but a closer look at the way the pulses market operates would show that consumers are most unlikely to benefit from any duty cut.

It is doubtful if the Government really knows the pulses trade as well as it should;, otherwise it would have not remained clueless about the dynamics of the pulses market including imports and prices for several years now.

There is little doubt that pulses output this kharif season would be lower than anticipated following a 20 lakh hectares decline in area because of prolonged dry spell in June and July in the central and northern parts of the country.

Indeed, it would be nothing new, for, the production of this essential food crop has consistently fallen short of target and the country's consumption requirement, necessitating imports.

Of the annual production, kharif season pulses account for only 40 per cent; and the rabi season the bulk. Pulses are grown under rainfed conditions in marginal lands with low levels of input usage. No wonder, yields are low.

The prospect of pulses output dipping to one of the lowest levels in recent years is real. On current reckoning, the decline could be as much as 10 lakh tons. But there is an opportunity to make up— at least partially— the kharif shortfall in the ensuing rabi season. Summer crop of pulses accounts for as much as 60 per cent of annual output.

It is necessary to remember that the supply chain in pulses, especially imported pulses, is rather long. There are far too many intermediaries adding to the cost, but not to the value of the product. The trade is highly fragmented and there is little monitoring.

The difference between the landed cost of imported pulses and the retail level is rather big. Often, consumers end up paying 30-40 per cent more than the cost of imported material ex-docks. If past experience is any guide, it is unlikely that the benefit of lower duty will be passed on to consumers.

Pulses imports into the country have been going on for nearly 20 years and they are likely to continue in the future.

Forward trading in pulses is banned under the Forward Contracts (Regulation) Act, 1952; but in blatant violation of the law, illegal forward trading has become the order of the day. The Government seems to be blissfully unaware of what's going on in the pulses market.

Indeed, pulses importers have got into a loop — like their edible oil counterparts — whereby they are forced to continue to import more and more to pay for previous consignments that were bought on credit. This is one of the reasons why the country ended up importing nearly 22 lakh tonnes last fiscal, showing an increase of 600 per cent from the previous year's 3.5 lt.

This cycle of ``import on credit and import more to pay for previous cargoes'' is dangerous. This undesirable practice has the potential to sink players. If, for any reason, the payment cycle gets disrupted, both Indian importers and overseas suppliers could get into serious trouble and lead to trade disputes.

The Food Ministry's concern for the consumers is genuine; but consumer interest is unlikely to be advanced through cosmetic measures like reduction in customs duty. The Food Ministry must think about what it can do to address supply side inefficiencies.

It must get over its undue obsession with wheat and rice, and divert attention to coarse grains and pulses. For instance, given the high risk associated with pulses cultivation, farmers deserve better policy support in terms of higher prices and procurement of at least limited volumes. Supply of pulses through the public distribution system should be explored.

In most parts of the country rainfall during August was good. Assuming normal rains in September too, the government must target production of at least 100 lakh tonnes of pulses in the rabi season. It is not an impossible target. In 1998-99, rabi pulses output was 98 lakh tonnes.

Send this article to Friends by E-Mail

Stories in this Section
More farm ponds in Kurnool; more take to horticulture

Rubber dealers not to pay cess to board

Call for open trade policy in rubber product exports

Plea to treat tea as premium product

Forward trading in bullion demanded

Pulses duty cut won't benefit consumers

Global wheat seen firm on tight supplies

Karnataka to expand mulberry cultivation

Crude soya oil comes under tariff value net

Put off tobacco auctions: Gowda

Cardamom up on good demand