The Union Government has proposed to raise the basic customs duty and impose Agriculture and Infrastructure and Development Cess (AIDC) on some key agricultural commodities, which are imported, “to create a level-playing field” for Indian farmers.
“To benefit farmers, we are raising customs duty on cotton from nil to 10 percent and on raw silk and silk yarn from 10 percent to 15 percent. We are also withdrawing end-use based concession on denatured ethyl alcohol. Currently, rates are being uniformly calibrated to 15 percent on items like maize bran, rice bran oil cake, and animal feed additives,” Union Finance Minister Nirmala Sitharaman said, tabling the 2021-22 Budget proposal in Parliament.
“The 10 percent duty on cotton imports is a definite sign of protecting farmers. Currently, we import extra-long staple (ELS) cotton from the US (Pima) and Egypt (Giza),” said Rajkot-based raw cotton, yarn and spinning waste trader Anand Poppat.
India imports about 15 lakh bales (170 kg each) of ELS cotton from the US, Egypt and Australia every year. In the past, domestic shortage has led to imports from Africa and Brazil.
Cotton Association of India President Atul Ganatra said the duty may not make much impact as India hardly imports regular cotton. “We import only ELS cotton. As per Cotton Advisory Board (CAB), only 11 lakh bales of cotton will be imported,” he said.
CAB is a board comprising cotton growers, traders, users and government representatives. Five lakh bales have been imported so far this season that began on October 1, 2020.
Similarly, Mulberry farmers and silk weavers stand to gain from the five percentage points increase in Customs duty to 15 percent.
Sugarcane, maize and paddy growers are expected to gain from customs duty being raised by 2.5 percentage points to five percent on denatured ethyl alcohol.
Maize and paddy growers will also gain from the Customs duty being raised to 15 percent from zero on maize bran and de-oiled rice bran cake.
While imposing AIDC on some of the agricultural imports, the Centre has also rationalized the basic customs duty on produce such as apple, crude palm, soybean and sunflower oils, peas, Kabuli chana (gram), Bengal gram and lentils.
Apple imports will now attract a basic duty of 15 percent from the earlier 70 percent.
“The basic custom duty rates have been reduced with the imposition of AIDC on these so that overall, the consumer does not bear additional burden on most of the items,” said the Budget document justifying the lowering of the duty.
As regards AIDC, crude palm oil will now attract 17.5 percent cess, while a 20 percent cess will be imposed on crude soybean and sunflower oils.
Apples will now attract an AIDC cess of 35 percent, peas 40 percent, Kabuli chana 30 percent, Bengal gram 50 percent, lentils 20 percent. Cotton not carded will be imposed a five percent cess.
The AIDC cess on cooking oils such as crude palm, sunflower and soybean oils will have a couple of positive fallouts. One, oilseed farmers can now look forward to getting better prices for their produce as rising imports have been depressing prices.
India imports over 15 million tonnes of cooking oil with palm oil being around two-thirds of it.
Two, this will also help the domestic oilseed crushing sector, mainly medium and small sectors. Three, it will also save a good amount of foreign exchange that is spent to buy the oils. India nearly spends Rs 70,000 crore on buying cooking oils.
A feature of the AIDC is that the Agriculture Infrastructure Fund, which will get the fund from AIDC, will augment infrastructure facilities at the Agricultural Produce Marketing Committee (APMCs) yards.
This, in a way, is to counter the allegations by the Opposition parties and some farmer organizations that the agricultural reforms carried out by the Union Government last year would result in APMCs winding up.
These proposals are not only seen as ones to protect farmers but also achieve self-sufficiency in the areas of oilseeds and pulses.
While self-sufficiency will ensure import of cooking oils is minimized, self-sufficiency in pulses will lower shipments of peas, chana and other such produce that is brought into the country to make for the production shortfall.
The Centre has also proposed to raise the exemption limit for agriculture income to Rs 2.5 lakhs from the earlier Rs 5,000 in the overall computation of income tax of individuals.
On the foreign exchange outgo on cooking oils, Rs 70,000 crore is spent annually.
Making it clear that it is annual outgo.
(Subramani Ra Mancombu is a journalist based in Chennai, who writes on topics in commodities and agriculture)
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