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QR phase-out may influence Budget moves

Our Bureau

MUMBAI, Feb. 25

THE voices of protest, especially from the agricultural commodity producers, heard for the past several months against the liberal import policy of the Government have turned more shrill in recent weeks. This has followed the advancement of the phase out period for quantitative restrictions (QRs) on imports by two full years.

India will have to phase out QRs by March 2001. After that, the only protection against competition from cheaper imports available to the domestic producers will be in the form of tariff. The export-import policy will have little relevance except for a s hort negative list of items. The Government is committed to reduction of tariff and has, indeed, pared rates of customs duties over the last three years.

The list of major agricultural commodities permitted for import includes foodgrains such as wheat, rice, maize and pulses, oilseeds and vegetable oils, sugar, cotton, spices, tea, horticulture products and rubber. Many more will become importable once th e QRs are removed. During a time when the commodity markets are down, the opening up of the country's trade frontiers will provide a great opportunity for global suppliers.

In a number of these commodities, the Government has provided tariff protection by suitably imposing customs duty for the first time such as in wheat or raised duties from time-to-time as in the case of sugar and edible oils. Commodities such as rice and maize are being imported without any duty.

Many industries and growers organisations have flayed the Government for permitting liberal imports without taking into account the plight of the domestic players. The tea industry is a good example. Domestic producers have demanded adequate tariff prote ction against low-priced imports from Sri Lanka.

Although the country had earlier agreed under the GATT to keep zero per cent duty on agricultural commodity imports, recently the Government has negotiated on a bilateral basis for imposing a reasonable tariff. There is general belief that on agricultura l imports the minimum rate of duty will be 15 per cent.

Interestingly, until recently, apart from the exim policy and customs duty, the domestic players had additional protection in the form a weakening rupee. Falling value of the currency in the foreign exchange market makes imports expensive and provides ad ditional protection. For exporters, weakening currency allows more competitive pricing of the export product.

In the last one year, however, the rupee has held fairly steady against the dollar. This has to some extent affected the profitability of exports, while making imports fairly attractive. A steady rupee is seen as a contributory factor to the decline in a gricultural and allied products exports during the current year.

The Finance Minister, Mr. Yashwant Sinha, has a tough job on hand. He has to make sure that the consumers are not deprived of imported goods. At the same time, he has to ensure that the domestic producers are not hurt by indiscriminate or cheap imports. It is well known that most of the bulk agricultural exports undertaken by developed countries bear direct and indirect subsidies.

It is unfortunate that over the years, the budgetary exercise has become a ritual to tinker with rates of duties and taxes, depending on the exigencies of the situation and in response to lobbying efforts of pressure groups.

The forthcoming Budget must show a paradigm shift by laying down broad contours of policies and programmes that would make the Indian agricultural commodities globally competitive over a period of time. Areas of weaknesses in production, processing and m arketing of agricultural commodities are well known. Our policies must attempt to remove the weaknesses.

In other words, tariff protection must be tied to commitment from the domestic producers for becoming efficient. Protection must be given only with a quid pro quo. Those seeking protection must be forced to give in return something to the economy, prefer ably in terms of improved production, productivity and quality.

This is easier said than done. But a beginning must be made. The Finance Minister needs the support and co-operation of his colleagues in the Government, especially from the Ministers for agriculture, food and commerce. The State Governments, too, have a n active role to play in the national endeavour to make agriculture globally competitive. Commodity Boards, Export Promotion Councils as also the trade and industry associations will have to pitch in with their contribution.

In order to make domestic agriculture globally competitive, we need long-term farm policies which address issues relating to production and productivity, input delivery systems, pre and post-harvest practices, farm produce marketing, quality aspects and of course exports. Unfortunately, the new Agriculture Policy about which this Government has been talking about for long has not yet seen the light of the day.

As for the processing industry, fragmentation of capacities and poor economies of scale apart from inadequate quality control are the major problems. The processing industry must be forced to address these issues. Logically, the Budgetary provisions and farm policy should be dovetailed. Whether the forthcoming Budget would do it remains to be seen.