Ahead of polls, government’s trade policy swings from pro-consumer to pro-producer

The government’s real concern now is about the already planted rabi onion crop that will start arriving in the markets during March-April. A price collapse at that point can seriously dent the ruling BJP’s prospects in Maharashtra, where onion is a major crop grown in districts such as Nashik, Pune, Ahmednagar, Dhule and Aurangabad.

But it is not just onions. On Friday, the Centre also extended the current restrictions on import of peas (matar) by three more months till March 31, 2019. Peas — specifically white/yellow peas — account for around half of India’s pulses imports. In 2016-17 and 2017-18, the country imported Rs 27,080.63 crore and Rs 17,705.45 crore worth of pulses, with peas alone contributing Rs 8,093.50 crore and Rs 5,945.02 crore, respectively.

These imports, however, have fallen drastically this fiscal. Imports of major pulses during April-October, at 8.64 lakh tonnes (lt), were valued at a mere Rs 2,033.12 crore. India imports white/yellow peas mainly from Canada, Russia, Ukraine and Romania. Suppliers of other pulses include Australia for chana (chickpea); Canada and Australia for masur (lentil); Myanmar, Mozambique and Sudan for arhar/tur (pigeon-pea); and Myanmar, Tanzania and Australia for moong/urad (green and black gram).

In both onion and pulses, the NDA government’s trade policy has seen a distinct shift over the last year – from pro-consumer to pro-producer, which is also clearly linked to growing agrarian unrest and steep fall in crop realisations.

Only one year ago, export of onions was actually being discouraged. On November 23, 2017, the Centre imposed a minimum export price (MEP) of $850 per tonne, below which no onion was allowed to be shipped out. During that time, the bulb was on fire, with average prices at Lasalgaon quoting at Rs 3,500-3,600 per quintal. But as domestic prices eased, the MEP was first reduced to $ 700 per tonne on January 19 and then scrapped altogether on February. Since then, as prices have crashed and farmer anger has spilled on to the streets, the government has turned to subsidising onion exports.

The same goes for pulses. In 2016-17 and 2017-18, India imported 64 lt and 54 lt of pulses, despite domestic production for these two years also hitting record highs of 231.3 lt and 252.3 lt, respectively. With the total availability from production and imports far surpassing India’s estimated annual consumption requirement of 230-240 lt, farmers suffered a sharp drop in realisations below official minimum support prices. This, in turn, prompted a review of import policy.

In August 2017, imports of arhar/tur and urad/moong were moved from “free” to the “restricted” list. The same was done for peas in April 2018, while a steep 60 per cent import duty was clamped on chana with effect from March. That apart, exports of all milled pulses or dals were made free sans any quantitative ceiling in November 2017.

The above shift in trade policy has had an effect, particularly on imports. Most pulses – including yellow/white peas that are a cheap substitute for chana and even used for adulteration of besan flour made from the latter – have registered huge dip in imports after the imposition of higher duties and quantitative restrictions.

These restrictions can make some difference when the next chana, matar and masur crops are ready for harvesting from late February to March onwards. And that is just when elections are round the corner.