Monday, Jun 22, 2020

By Animesh Deb

NEW DELHI – The government had slashed import duty on masur to 10% from 30%, effective Jun 2 till Aug 31, except for the crop originating in or exported from the US. However, the timing of the cut has rankled market participants with experts saying it will unintentionally impact domestic prices.

The key bone of contention is that the duty cut has come at a time when current market prices are around or just a notch higher than the government-set minimum support prices and at the time when harvesting has just been completed.

Within 24 hours of the announcement, international masur prices had jumped about 12-15%. Prices are still largely at elevated levels, said a member with the India Pulses and Grains Association.

In Canada and Australia, prices of the pulse rose to $675 a tn, and $715 a tn, respectively, data showed. Canada and Australia are two major suppliers of masur to India.

This sharp rise in international prices may potentially lead to a price disparity for pulses importers, said Jitu Bheda, chairman of India Pulses and Grains Association adding that the move was untimely as it could hurt domestic producers and aid overseas farmers.

In Madhya Pradesh, a major grower, current masur prices are in a range of 4,805-5,050 rupees per 100 kg, a little above the minimum support price of 4,800 rupees, according to AgMarket data. 

"The Centre took this decision on masur as part of abundant precaution so that domestic prices don't rise sharply in the coming days," said Ajay Kedia, head of Kedia Commodities.

However, experts say the import duty cut comes at a time when prices of most pulses are below the minimum support price.  

"Out of India's entire pulse basket, nearly 75% accounts for chana and tur, which is currently trading below the MSP; we should look at it holistically," said a Punjab-based farm expert.

The import duty cut notification also came just few days after the Reserve Bank of India's policy statement in which Governor Shaktikanta Das had expressed concern about the spiralling prices in pulses in domestic markets. Das heads the inflation-targeting Monetary Policy Committee, and suggested supply side measures, including on imports, to prevent a sharp rise.

However, traders pointed out that price rise during the lockdown was inevitable due to supply disruptions in the absence of requisite numbers of workforce and transportations, and there was some panic buying and hoarding at household level, as well during the initial days.

And now that the decision has come into effect, some experts say the cut should be extended beyond the three months and be maintained till the next harvest season, so that the advantage of lower import duty can be taken when there is a shortfall in domestic supply. 

Some market experts are of the view that it should have been imposed after some domestic crop is consumed.

"Ideally duty cut should happen from September as we have sufficient stocks to fulfil the demand till then," G. Chandrashekhar, veteran farm expert and economist said. 

India's masur production in the 2019-20 (Jul-Jun) rabi season is seen 10-15% lower on year at 1.2 mln tn due to unfavourable weather conditions and hailstorms during April, the National Agricultural Cooperative Marketing Federation of India Chairman Bijender Singh said recently.

Masur consumption for the period is pegged at 2.1 mln tn against 1.8 mln tn in the previous year, said Brian Clancey, an analyst at StatPub. India, in order to meet its domestic consumption quota for the year, would import the rest to meet its demand.   End

US$1 = 76.03 rupees

Edited by Maheswaran Parameswaran

Cogencis Tel +91 (11) 4220-1000

Send comments to feedback@cogencis.com