Dal diplomacy: India's import duty plans to spare the US, punish Canada

New Delhi: India may allow duty-free imports of US pulses, particularly lentils and dry peas, under a proposed Bilateral Trade Agreement (BTA). two people aware of the matter said, amid trade tensions between the two nation.

The plan is part of an attempt to keep the US happy and Canada at bay following strained relations with Ottawa. This means a proposed move to impose an import duty on masur (lentils) will impact Canada, one of India’s main suppliers, while sparing the US.

“With the import duty applicable to all exporting nations, the US will get duty-free access for a fixed quantity of lentils, similar to the arrangement India has with Australia under a trade agreement," said the first person.

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Domestic production of lentils has been rising in the last few years, from 1.27 million tonnes (MT) in FY22 to 1.56 MT in FY23 and 1.8 MT in FY24, according to agriculture ministry data.

"As domestic production of lentils rises, the aim is to minimize dependency on imports, and proposed policy adjustments will focus on balancing domestic interests with trade commitments," said the second person.

Queries emailed on 25 February to spokespersons of the ministries of commerce, external affairs, and consumer affairs as well as the Embassy of Canada, remained unanswered. A spokesperson for the US Embassy in New Delhi suggested consulting the Indian side regarding the plans.

Rising consumption

According to a consumer affairs ministry statement in the Lok Sabha in July last year, the consumption of lentils was 2.46 MT in FY22 and 2.32 MT in FY23.

In FY24, India’s total lentil imports stood at 1.84 MT, with the US accounting for just 0.01 MT, consumer affairs ministry data showed. With an annual supply shortfall of around one million tonnes, India is expected to increasingly rely on imports from Australia and the US.

Canada has been the top supplier. Till January of the current financial year (FY25), India had imported 0.96 MT of lentils, including 0.53 MT from Canada, 0.35 MT from Australia, and 0.05 MT from the US. Other countries that shipped lentils to India include Russia and Turkey.

In reply to an emailed query, a spokesperson at the Australian High Commission said, “The Australian government is closely monitoring any import duties that may be imposed on lentils."

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"Should duties be reinstated, under the Australia-India Economic Cooperation and Trade Agreement (ECTA), Australian lentils will still be able to utilize the 50% tariff reduction within a quota of 150,000 tonnes per year," the Australian spokesperson said.

"The broader part of this move could be to limit excessive imports to protect local growers and maintain fair prices, as unrestricted lentil imports would hurt domestic farmers by creating a surplus supply and lowering prices," said Prof. Rakesh Arrawatia of the Institute of Rural Management Anand (IRMA).

According to US Department of Agriculture (USDA) data, lentil production in America has increased in the recent past from 184,000 tonnes in 2022 (crop year) to 188,000 tonnes in 2023, and further to 319,000 tonnes in 2024, marking a 73% increase from the previous year.

In July 2021, the government reduced the effective customs duty on masoor dal imports from 10% to zero. Earlier, in June 2020, the import duty on masoor dal had been reduced from 30% to 10%. The zero-duty policy on lentils remains in effect until 31 March this year.

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