Missing the pulse: on policies for farmers

Farmers, like investors, need predictability and coherence in government policies

Published - December 23, 2017 12:15 am IST

In what may be the Centre’s first strike in response to the rural distress read into the Gujarat Assembly poll outcomes , a 30% customs duty has been slapped on the import of chana dal and masoor dal. The official reasoning is clear. 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. 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. 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. The value of chana imports in this period rose 373%, while masoor grew 204% year on 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.

The recent trend of moderation in imports indicates that the government may have moved too late to curb them, but flawed market timing isn’t the real issue. Reflexively raising or breaking such tariff walls, as the production cycle warrants, doesn’t add up to a serious long-term policy, which should be 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. Just last year, while prices were soaring in the Indian market, Prime Minister Narendra Modi signed a pact to double pulses imports from Mozambique. A bumper crop or two will not diminish the importance of such deals in harder times. 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. Farmers, like investors, need predictability and coherence in government policies. 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. The government must devise better means to shore up farm incomes without stirring up inflation or upsetting carefully cultivated food security partnerships around the world.

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