India may hike duty on crucial farm items

New Delhi, Feb 21: India is likely to hike duties on a few politicallysensitive farm products in next week's federal Budget, even thoughopposition parties have been pressing for many more tariff walls, analystssaid on Wednesday.Analysts expect Finance Minister Yashwant Sinha to offer protection tojust a few items that are politically crucial, such as tea, coffee, rubberand coconut oil."Tariff will be the only fiscal instrument with the government... But, itwill be done selectively," said G Chandrasekhar, commodities editor,Business Line. "In all other commodities duties are already fairly highand there are no surplus imports," he said.The government could also raise the import duty of crude palm oil, nowrelatively low compared to other edible oils. In the Buget, Mr Sinha isexpected to outline schemes to manage a huge stockpile of foodgrains, toimplement new agricultural policy and allow futures trading in sugar andtea. Mr Sinha's February 28 presentation of the national Budget is due tocome a day before India lifts quantitative limits on 714 items, incompliance with the World Trade Organisation rules.This follows an earlierrelaxation, last April, on 714 items.Other items of mass consumption like wheat, rice and sugar already enjoytariff protection, and commodities like pulses could continue to beimported duty-free because of chronic domestic shortages, analysts said.The agricultural sector accounts for 25 to 28 per cent of India's grossdomestic product and two-thirds of the country's nearly one billion peopledepend for their livelihood on products ranging from wheat and rice tooilseeds and cotton. India's opposition parties have accused thegovernment of neglecting the interests of farmers and agricultural workersalready hit by high input costs and lack of rains.Analysts said the removal of quantitative restrictions (QRs) on a similarnumber of items last April had not sparked a flood of imports and thescope for hiking duties this year is limited. Coffee now carries an importduty of 45 per cent, tea attracts a 35 per cent duty except for Sri Lankanexports which attract a much lower rate, rubber 25 per cent and coconutoil 45 per cent. Indian farmers and traders have been demanding steep dutyhikes on all these items. On agricultural products, India is free toimpose high tariffs, ranging from 65 to 300 per cent, officials say. AnilSharma, agriculture economist with the National Council of AppliedEconomic Research (NCAER) said more tariffs could be needed on some itemsin the wake of the removal of QRs.Analysts said tariff walls will have no significant impact on farmers'incomes and called instead for the reduction of the domestic cost ofproduction, through higher yields. Farmers' incomes have been hit not byexcessive imports but by a clutch of factors, including the high cost ofproduction, which makes goods uncompetitive in the export market, as wellas a lack of domestic purchasing power for some commodities and inadequateattention to promoting domestic demand for others.(Reuters)