Indian gov’t pressured to cut tariffs

The call from the country’s central bank comes at the same time that sweeping ag sector reforms have been proposed

There is mounting support in India for reducing tariffs on imported pulses as COVID-19 boosts food price inflation.

The Indian Express is reporting that Reserve Bank of India governor Shaktikanta Das is calling for the relaxation of duties after food price inflation surged 8.6 percent in April.

“Among the pressure points, the elevated level of pulses inflation is worrisome and warrants timely and swift supply side interventions, including a re-appraisal of the import duties,” he said.

One expert quoted in the story said the duties should be reduced to 15 percent, down from as much as 50 percent.

Greg Cherewyk, president of Pulse Canada, said that is a positive development.

“It’s encouraging from our perspective to hear that,” he said.

“But it’s not really clear how much influence the Reserve Bank of India has over the central government.”

What is clear is that pulse prices in India are rising in response to tightening supplies. Government stocks are declining as it carries out a program to distribute one kilogram of pulses per month for three months to 197 million needy families.

Vivek Agrawal, a trader with JLV Agro, an Indian commodity brokerage firm, believes there could be some reduced tariffs in the next two to four months.

“It’s not going to happen the next day. It takes time. But definitely things will change,” he said.

“The government is more liberal.”

A case in point is the recent announcement by the country’s minister of finance that the government intends to deregulate the Essential Commodities Act.

The announcement is part of 11 proposed agricultural market reforms many think will transform the sector.

“It’s a big development,” said Agrawal.

The Essentials Commodities Act restricted traders to holding 50 to 100 tonnes of pulses to prevent them from manipulating the market. They are now entitled to stockpile as much as they want.

Agrawal believes the relaxation of the stocks rules will attract new commercial players into the pulse trade, providing more competition for the purchase of domestic and imported pulses.

“They will come with a good amount of money and it will increase the business,” he said.

Many heavily regulated aspects of the agriculture industry are being relaxed, creating a far more open market for trade of commodities like cereal grains and pulses.

Agrawal believes the reforms will eventually result in more robust imports from Canada and other regions, but that may take time.

Cherewyk said India’s importers are pleased with the announcement because they had been living in fear of government raids, penalties and fines for stockpiling.

“Less government intervention should mean more price stability and predictability in trade,” he said.

“It could also encourage more investment into storage and handling and distribution.”

However, Canadian exporters are not planning to ramp up sales just yet because what the government announced is an intention.

It still has to clear a lot of hurdles, including state approvals and the states have a lot of power in India, said Cherewyk.

He is in favour of any government policy that results in increased predictability and transparency in trade. Pulse Canada is eager to work in partnership with the Indian government on policies that achieves that objective.

Cherewyk said the Indian government remains committed to doubling farmer incomes and becoming self-sufficient in pulse production, two policies that would support the country’s 120 million farmers.

Pulse Canada hopes those objectives can be achieved while providing a stable trade environment for pulse exporters.

Agrawal thinks Canadian pulse firms and growers should start viewing India in a different light.

“Canadian farmers have to see India not as a market, they have to use it as a tool,” he said.

One of India’s proposed reforms will pave the way for foreign direct investment in the country.

He can see the day when a Canadian company decides to build a pea fractionation plant in India to service Southeast Asia.

“Route through India to feed all the world because India has cheap labour, everything is cheap,” said Agrawal.

About the author

explore

Stories from our other publications