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Govt going Swadeshi in agriculture?

Harish Damodaran

NEW DELHI, June 20

THE Vajpayee regime has lately been facing severe flak, from the Opposition as well as its own Swadeshi caucus, on the decision to allow 100-per cent foreign direct investment in power, oil refining and e-commerce.

The Government has also been forced on the defensive on the move to scrap the dividend balancing condition applicable to foreign consumer good companies and the alleged favoured treatment meted out to Mauritius-registered foreign institutional investors.

While the Government's apparent ``sell-out to multinationals'' on finance and industry-related issues have attracted considerable attention in the media and political circles, what is interesting, however, is the virtual absence of publicity on its recen t policy decisions concerning agriculture.

If one were to particularly highlight the significant import duty changes effected on various agri-commodities over the last six to seven months, it is something that should warm the cockles of Swadeshi hearts.

Considering that all these have eventually led to a sizeable increase in duty protection levels to the Indian farmer, a sum-up of the upward tariff revision measures undertaken in the recent period would perhaps be in order.

The whole exercise was kicked off on December 1, 1999, with the Government clamping a 50-per cent customs duty on wheat, in the wake of import of around two million tonnes of wheat by roller flour mills during the fiscal. This was followed by the decisio n on December 30 to raise the import duty on sugar (from 27.5 per cent to 40 per cent) and refined edible oils (from 16.5 per cent to 27.5 per cent). The duty on sugar was further increased to 60 per cent on February 8.

The next significant step came on April 5, when the basic customs duties (BCD) were hiked on a host of agricultural items, whose tariffs were historically `bound' at zero per cent under the General Agreement on Trade and Tariffs (now World Trade Organisa tion) regime. The commodities, in which duties were hiked from zero per cent, included paddy, broken and brown rice (80 per cent), milled rice (70 per cent), sorghum, millets and maize seed (50 per cent). Besides, the duties on apples and fresh grapes we re increased from 35 per cent to 50 per cent and from 25 per cent to 35 per cent.

Then, on May 3, as part of the amendments to the Finance Bill, 2000 moved in the Lok Sabha, the Finance Minister, Mr. Yashwant Sinha, announced an increase in the BCDs on tea and coffee (from 15 to 35 per cent) as well as on poultry meat and its preparat ions (from 35 to 100 per cent).

The most recent of tariff increases took place on June 12. In deference to the solvent extraction industry's demand to ``regulate the unabated imports of edible oils'', the Government raised the BCDs on crude oils from 15 to 25 per cent and refined oils from 25 to 35 per cent.

Simultaneously, the duty on oil-bearing materials was brought down from 35 to 15 per cent, though this facility was extended only to oilcake and rice bran. The duty on oilseeds per se was retained at 35 per cent, keeping in view the need to protect the i nterests of domestic growers.

On the same day, the Government also instituted a Tariff Rate Quota (TRQ) regime for imports of maize (grain as against seed) and milk powder, effectively raising tariffs from their earlier zero-bound levels. Thus, imports of up to 10,000 tonnes of milk powder were subjected to a 15 per cent BCD, with this rising to 60 per cent on imports beyond 10,000 tonnes. Similarly, for maize, a 15-per cent duty was fixed on imports up to 3.5 lakh tonnes and 50 per cent on imports exceeding these quantities.

From the above, it can be seen that the last six to seven months have witnessed a significant transformation in the country's agricultural tariff regime, involving imposition of higher import duties on a wide range of farm commodities. Whether this has b een part of a conscious Government policy is not clear. In some cases, especially in wheat and rice, the duty rationalisation seems to have been prompted more by the Government's own immediate problems (reduced offtake of foodgrains from the Central pool due to cheaper imports).

On some others -- sugar, edible oils and tea -- the upward tariff revisions have come largely on account of concerted lobbying by the concerned industry associations. The higher duties on milk powder and maize, similarly, would not have been possible, ha d India not re-negotiated the bound tariff rates on these commodities with its major trading partners under WTO auspices.

But the present Government can still take the credit for the recent measures ostensibly aimed at safeguarding the interests of domestic farmers. Why it is not going to town on this, thereby even partially redeeming its supposed Swadeshi credentials, is i ndeed a mystery.