Increased Production & Lower Import Duty May Affect Lentil Farmers

According to the second advanced estimates, India's rabi harvest season is just a month away, and a record production of pulses – 18.34 million tonnes (mt) versus the objective of 16.84 mt – is expected. 

Lentil (masur) production is expected to be the second-highest in the season's pulse basket (1.58 mt).

In addition, the predicted lentil production volume is the second-highest in the last 14 years. According to experts, bumper output paired with reduced import duties might hurt farmers. 

Lentil is now trading over its minimum support price (MSP) of Rs.5500 per quintal in the key producing states of Uttar Pradesh, Madhya Pradesh, West Bengal, and Bihar. Gram, the other significant Rabi pulses crop, is trading at or below MSP. 

According to agricultural experts, this may not be enough to offset the impact of reduced import taxes. The Centre has reduced the import duty on lentils for Australia and Canada and brought it down to 22 per cent from 30 per cent for the United States. 

According to the government, the decision was made to reduce food inflation. "The price of lentils would have naturally fallen down with the huge supply of crops that would arrive in the market in the coming weeks," said Bimal Kothari, director of Pancham International Ltd and vice-chairman of the India Pulses and Grains Association. 

The drought in Canada in 2021 may have harmed lentil output in the country from which India imports a significant portion of its lentils. Experts say that while zero duty will make it more profitable for traders to begin importing, there was no immediate inflation pressure on pulses for the government to take this decision. 

"Pulse prices remain constant and most are selling around MSP," Kothari stated. After analyzing the price trend following the arrival of the rabi crop, an import tariff cut may have been implemented. 

Lentil prices reached an all-time high last year, but there are no immediate constraints this year, according to Shweta Saini, senior fellow at ICRIER (Indian Council for Research on International Economic Relations) and a researcher on Indian agricultural policies. "Import will dilute the incoming crop (rabi arrival),” she said. 

According to Mohit Upadhyay, an importer and trader of pulses, grains, and oilseeds, the decision to reduce import duty defies logic. "The decision was made to keep inflation under control, but as soon as the cuts were announced, the worldwide price of lentils soared from around $870 per metric tonne to $900." 

He added, "When such cuts are made, other nations which are major exporters of these commodities get the impression that India's forthcoming harvest would be poor, and worldwide prices rise. However, the lentil crop is expected to be good. At the same time, the government is encouraging private players to import more. There was no reason for such a move." 

Lentil prices, however, are unlikely to climb below MSP, experts believe. 

Drought in Canada has resulted in a 50% reduction in production, according to Nitin Kalantri, a major pulse trader from Maharashtra. "Masur prices are high in foreign markets, and the government has been unable to regulate them at domestically." 

In the recent past, the government has repeatedly changed pulse policies, which might be contrary to the country's push for pulse production. 

Last year, the government opened import of tur and moong and moved them from ‘restricted’ to ‘free’ category till March 2022. But last week, along with an import duty cut on lentils, the government changed the import policy for moong and moved the crop from ‘free’ to ‘restricted’ category with immediate effect. 

Traders who had engaged into contractual commitments to import moong urged the government to reconsider its decision since it would have an impact on the moong trade. 

"This is posing difficulties for importers and dealers who have already signed contracts with the supplier. The traders would be in default, and their remittance money will be at stake," Kothari said. 

According to Kalantri, one of the possible reasons for this decision was the buffer stock of moong with the National Agricultural Cooperative Marketing Federation of India. The crop's buffer stock is at a record high of around 1.3 million tonnes, and disposal is taking place below MSP, according to the expert.