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Amid worries over high level of pulses inflation, RBI Guv calls for re-appraisal of import duties

Food inflation — which had eased in February and March — had “suddenly reversed” and surged 8.6 per cent in April “as supply disruptions took their toll immune to the ongoing demand compression”, said Shaktikant Das.

Written by Prabha Raghavan | New Delhi |
May 23, 2020 2:01:50 am
RBI Governor Shaktikanta Das said many corporates are finding it difficult to raise funds from the
capital market. (PTI)

With the COVID-19 outbreak and the nationwide lockdown leading to a surge in the prices of pulses in India, Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday flagged the need for a review of the import duties levied on these products.

Some experts feel the duties would have to be brought down to at least 15 per cent from duties as high as 50 per cent at present, in order to ensure sufficient supply and stabilise these prices.

“The supply shock to food prices in April may show persistence over the next few months, depending upon the state of the lockdown and the time taken to restore the supply chains after relaxation of the lockdown. 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,” said Das during Friday’s announcement, where the central bank cut interest rates and extended the moratorium on term loans and working capitals by another three months.

Food inflation — which had eased in February and March — had “suddenly reversed” and surged 8.6 per cent in April “as supply disruptions took their toll immune to the ongoing demand compression”, said Das, citing “incomplete” inflation data by the National Statistics Organisation (NSO).

“Prices of vegetables, pulses, oilseeds, milk and cereals emerged as pressure points,” he said, adding that the inflation outlook is “highly uncertain”.

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India produced 23.40 million tonnes of pulses in the 2018-19 crop year, 25.42 million tonnes in 2017-18, and 23.13 million tonnes in 2016-17, according to government data.

Prior to this, production of pulses in the country remained below 20 million tonnes (between 2005-06 and 2015-16).

Meanwhile, imports of most pulses dropped between 2016-17 and 2018-19, according to data from the Ministry of Commerce and Industry.

“Normally, for all these years, we were continuously short of pulses. But, in 2016-17, we had around six million tonnes jump in production. This used to be on average the amount in pulses that we would import every year,” said Dr Ashok Gulati, Infosys chair professor for agriculture at ICRIER. This led to a raise in import duties to as much as 50 per cent from around five per cent earlier, he said.

“Now, we have run out of all those stocks and there is domestic pressure and excessive demand, perhaps because of the lockdown … the only way to cool down the pressure is to augment supply by reducing the duty to around 15 per cent,” Gulati said.

The nationwide lockdown has also halted activities in pulse mills, leading to the shortfall and sharp spike in price currently being experienced, according to Trade Promotion Council of India (TPCI) chairman Mohit Singla. “Approximately 3 million tonnes of imported pulses would be needed to meet the shortfall in the current fiscal year, as domestic consumption of pulses is at 25 million tonnes,” he said.

“A production target of 26.30 million tonnes for pulses was set by the Union Government for the year 2019-20. The actual production would be reduced by 10 per cent because of unseasonal rain and a subsequent reduction in the area of land being cultivated for pulses,” Singla said.

“Thus, the government may think to further revise the import quota or can also think to reduce import tariff as suggested by RBI to release the inflationary pressure,” he added.

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