India's Zero-Tariff Policy on Lentil Imports Boosts Canadian and Australian Trade

Dried Lentil

India

Market & Price Trends

Published Apr 26, 2023

The Indian government has extended the zero-tariff policy on lentil imports, which was set to expire on March 31, 2023, for another year, except for the US, which is subject to a 10% tax. The domestic demand for lentils is expected to be high. To ensure lentils supplies, an extension of zero-rate tariffs on lentils moving into India for another year should be a clear sign that the country is in the market for imports. This has benefitted the exporting markets, especially Canada and Australia.

The Indian government has extended the zero-tariff policy on lentil imports, which was set to expire on March 31, 2023, for another year, except for the US, which is subject to a 10% tax. Despite an 8% YoY increase to 4.56 million acres in the area of Indian lentil plantations in 2023, the Indian government will want to boost its buffer stocks of lentils

The domestic demand for lentils is expected to be high. The consumption of lentils in India is increasing as the consumption shifts from pigeon peas to lentils. Pigeon pea prices are sky-high in India because of the El Nino weather conditions during the kharif (summer) season, affecting pigeon pea crops. Spot prices have been climbing steadily since the start of the new year and are now about one-third higher than they were a year ago. The high price of pigeon peas is expected to drive consumption to shift towards lentils in India.

To ensure lentils supplies, an extension of zero-rate tariffs on lentils moving into India for another year should be a clear sign that the country is in the market for imports. This has benefitted the exporting markets.

Source: Trademap

India is the leading importer of dried lentils importing 726,820 mt worth 527.1 million in 2021, with the majority of supplies from Canada and Australia. With the zero-tariff policy extension by the Indian government, Canada can boost its lentils by 35%-34% YoY according to Tridge estimates. Agriculture and Agri-Food Canada (AAFC) March 2023 report projected Canadian lentil exports to rise to 2.3 million mt in MY 2022-23, an increase of 44% YoY. Australia’s production is forecasted to grow a record 7% YoY to 1.06 million mt lentil crop in 2022-23, which would be the first time Australia's production exceeded one million mt.

Australian lentils have been favored over Canadian lentils because of the price discount of Australian lentils. Adding to that is the freight advantage of Australian lentils to the Indian market.

Because the demand for lentils in India is growing, India will have to find about 0.9 million mt lentils outside of its domestic market to ensure supplies are fulfilled. This drives the outlook for the lentil market in India to be tighter Lentil exporting countries, especially Australia and Canada should be prepared to boost their supply to India. But Canadian lentils will have to make some price corrections in order to compete with Australian lentils when it comes to the Indian market. In the long run, India may end up being the winner as Canada and Australia compete for supplying to the Indian market which will end up edging down their export prices.