Duty-Free Imports of US Pulses
Context:
India is considering allowing duty-free imports of pulses from the United States, particularly lentils and dry peas, under a proposed bilateral trade agreement (BTA), according to sources familiar with the matter.
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- The move aims to strengthen trade ties with the US while limiting imports from Canada, amid strained relations between New Delhi and Ottawa.
India holds a significant position in the global pulses market, being the largest producer, consumer, and importer of pulses worldwide. India produces around 25% of the world’s pulses and accounts for 27% of global consumption. In fiscal year 2024, India’s pulses imports surged by 84%, reaching a six-year high due to lower domestic production and government policies like waiving import duties on certain pulses. The top five pulses-producing states in India are Madhya Pradesh, Maharashtra, Rajasthan, Uttar Pradesh, and Karnataka. Pulses are crucial for protein intake, especially for vegetarians, as they contain 20-25% protein by weight, which is higher than wheat and rice. Pulses are vital for nutritional security, providing essential minerals, vitamins, and fibers. However, India faces a demand-supply gap, necessitating imports. Various government programs aim to enhance pulse production and achieve self-sufficiency. These include initiatives like PM-AASHA and Minimum Support Price (MSP) to support farmers.
Balancing Trade Commitments and Domestic Interests
- Import Duties: Currently, import duties apply to all exporting nations.
- However, under the proposed arrangement, the US would receive duty-free access for a fixed quantity of lentils, similar to India’s existing agreement with Australia.
- This policy adjustment seeks to balance India’s trade obligations while safeguarding domestic agricultural interests.
- Lentils: India’s lentil production has been on a steady rise, increasing from 1.27 million tonnes (MT) in FY22 to 1.56 MT in FY23 and 1.8 MT in FY24, according to data from the agriculture ministry.
- With growing domestic production, the government aims to gradually reduce dependency on imports while ensuring stable market conditions for local farmers.
Lentil Imports and Trade Relations
- Consumption: India’s lentil consumption was recorded at 2.46 MT in FY22 and 2.32 MT in FY23. In FY24, total lentil imports stood at 1.84 MT, with the US contributing only 0.01 MT.
- However, with an annual supply shortfall of approximately one million tonnes, India is expected to increase its reliance on imports from the US and Australia.
- Canada: Canada has historically been India’s top supplier of lentils.
- As of January in the current fiscal year (FY25), India had imported 0.96 MT of lentils, with Canada supplying 0.53 MT, Australia 0.35 MT, and the US 0.05 MT. Other suppliers include Russia and Turkey.
Australia’s Position on Potential Tariffs
- Australia is closely monitoring any changes to India’s import duties on lentils.
- Under the Australia-India Economic Cooperation and Trade Agreement (ECTA), Australian lentils benefit from a 50% tariff reduction within a quota of 150,000 tonnes per year.
Protecting Domestic Farmers
- Experts suggest that India’s broader policy objective may be to regulate imports to protect local farmers and maintain fair prices.
- Unrestricted lentil imports could lead to a surplus supply, driving down prices and adversely affecting domestic growers.
US Lentil Production on the Rise
- Data from the US Department of Agriculture (USDA) indicates that American lentil production has significantly increased in recent years.
- Production rose from 184,000 tonnes in 2022 to 188,000 tonnes in 2023, and further to 319,000 tonnes in 2024—marking a 73% year-on-year increase.
India’s Evolving Import Policies
- In July 2021, India reduced the effective customs duty on masur dal imports from 10% to zero, following a prior reduction from 30% to 10% in June 2020.
- The zero-duty policy remains in effect until March 31, 2025.
- Any changes beyond this date will depend on India’s evolving trade strategies and its need to balance domestic agricultural interests with international commitments.
