Context
Farmers, like investors, need predictability and coherence in government policies
What has happened?
A 30% customs duty has been slapped on the import of Chana dal and Masoor dal
Why, this move?
- Cheap imports could hit farm incomes especially at a time when domestic production of pulses is at a record high and a bumper rabi crop is expected
- With an adequate domestic stockpile of pulses and with international prices remaining low for a prolonged period, the Centre fears that traders may still prefer to import some pulses rather than buy the fresh crop from local farmers at higher prices
Situation wrt pulses
- Upsurge in imports: There has been a significant upsurge in imports, in the range of 30% to 46%, in four out of the first six months of this financial year
- The value of chana imports in this period rose 373%, while masoor grew 204% year on year
- Key contributors: Chana and masoor were the key contributors for India’s pulses imports rising to over $1.6 billion between April and September, compared to $1.2 billion in the same period last year
- In September, masoor imports shrank 56% in value terms while chana imports grew by a little over 200%
- Disaggregated data for the last two months are not available, but overall pulses imports have cooled off since September, with total pulses imports shrinking nearly 30% in October and about 38% last month
Author’s contention
Author points out that the real issue is reflexively raising or breaking such tariff walls, as the production cycle warrants which doesn’t add up to a serious long-term policy, aimed at boosting farm incomes and ensuring food security. In the case of a key protein source like pulses, import duties may be counterproductive going forward
Why this recent move is not sound?
- Threat to dal diplomacy: India has dal diplomacy interests with more than 40 other countries, for whom the latest move will be of concern, especially since there is already 10% import duty on toor dal and a hefty 50% duty was levied on yellow peas in November
- Predictability is good: Farmers, like investors, need predictability and coherence in government policies
- Duty hike is counterproductive: Just as a duty hike on electronic goods won’t directly prop up local manufacturing or curb their consumption, hiking import duties on one dal or another won’t make farmers better-off — though traders who accumulated cheaper imports will benefit
