An interview with D R Balan/
India Should Allow Pulse Imports

At the young age of 23, just out of college, Balamurugan took up the responsibility of running a century-old family business of importing and selling pulses. His native State of Tamil Nadu in South India has traditionally been a major market for lentils, peas, and black grams. Pulses are an essential part of the daily diet of the state’s vegetarian population. With the local crop being small in size, sellers found it cheaper to import pulses from abroad rather than bring in supplies over land from the producing centers in north and central India. Naturally, Balamurugan, a fourth-generation entrepreneur, foresaw growing business opportunities in pulses.

In 1995, D R Balan, as he is known in business circles, set up a partnership firm to manage the business in the southern port city of Tuticorin. The port, the second largest in the state, has the capacity to handle bulk cargo, an important advantage for the business.

Interestingly, he chose an acronym—VNMAD (formed from the initial letters of the names of his father, grandfather, great grandfather and great-great grandfather) as the name of the company.

“It was done as a show of respect to the ancestors who started the business and with the intention of keeping up their tradition of trust and long-term commitments,” said a person associated with the firm.

As the Managing Partner of the firm, Balan is responsible for its day-to-day operations. Over the past 25 years he not only expanded the business by setting up a large modern warehouse as well as packing and processing units, but also enhanced the company’s credibility as a reliable indenting agent. As a Rating agency states: “Decades of presence and extensive experience enabled VNMAD to establish good relationships with suppliers and customers in India and abroad.” The firm has a large number of clients in the US, Canada, Australia and Russia.

As a hobby, Balan enjoys playing basketball. On weekend evenings he coaches young boys and girls at a nearby school. VNMAD has a flood-lit basketball court where local tournaments are held. A coach needs to know the game well. In business, one also has to know the trade well to be a good player. As a friend of his said: “Balan has his finger on the pulse of the pulses trade.”

There may be ups and downs in business, but what disappoints him the most is the lopsided government policy that hurts the trade.

“The government restricted pulse imports ostensibly to help farmers. But this created a shortage of pulses particularly in the south, affecting processing units and resulting in a black market in import permits. Additionally, there is a discriminatory tariff on lentil imports based on the country of origin. This is not right. The duty on a commodity should be the same irrespective of where it is imported from,” says Mr. Balan.

In this Trade Talk interview, Balan shares his views on the government’s policy on pulses imports, the impact of the rabi crop on prices and the overall market situation.

GPC: What are your views on the current pulse import restrictions? How have they impacted your company’s business? 

Balan: As far as South India is concerned, pulses are not available in sufficient quantities. For over two decades, the trade in the south has been importing peas from Canada, Russia and Australia, as there is not much domestic production in the region. In December 2019, the government imposed restrictions on imports. Since then, processing units have been facing a shortage of raw material. Nearly 300 units in and around Tuticorin were forced to shutter. Many others have been underutilizing their capacity. The trade has made several appeals to the government.

GPC: What would you suggest?

Balan: The government must open up the market to imports.

GPC: The government has allowed limited imports with duties.

Balan: This has not helped anyone. It only resulted in a black market for import permits. For the past two years, the government has been issuing licenses for pulse imports. Large volume importers have no option but to buy the license from other importers at a premium to meet their requirements. The running premium ranges from Rs 3000 per MT to Rs 5000 per MT. The quantity assigned to an importer should be based on his past turnover, but instead the total quota is divided equally among all those who apply for an import permit. Maybe the license amount should be based on the turnover of the past three years. The government can check the GST data to verify the turnover.

There are also discriminatory tariffs on some commodities depending on country of origin. For example, lentils from the U.S. carry a 55% duty while Canadian lentils carry only a 33% duty. The imported lentils are processed and supplied to the state public distribution system. Why this discriminatory tariff? The duty should be the same.

GPC:  How has the shortage of pulses impacted your own processing units?

Balan: We have to buy permits from others to meet our requirements. This increases our import costs. It may not be sustainable in the long run.

GPC: You have a warehouse and a processing unit. How has your capacity utilization changed after the import restrictions went into effect?

Balan: After the import restrictions took effect, most of the warehouses in and around Tuticorin have been underutilizing their capacity. The rent has dropped from Rs 10 per sq. ft. to Rs 5 per sq. ft. for modern warehouses. As far as our processing units are concerned, we are managing the production with local stocks. The margins are very low. Most processing units are running at minimum capacity.

GPC: Aren’t the import restrictions meant to help farmers and increase domestic production?

Balan: The import restrictions are creating shortages of the commodity. This is not the way to help farmers. The government procurement system is not working efficiently. The government should help increase the per capita consumption of pulses, which is very low in India. Look at the government’s minimum support prices; they are above the market price. Why has the government failed to notice this?

GPC:  There have been calls from various quarters to distribute pulses through the Public Distribution System. What is your view on this?

Balan: Yes, I support it. It may help increase the availability of pulses to poor people. In fact, some state governments have distributed pulses through PDS during the lockdown.  

GPC:  Pulses prices, which were high since April, have fallen following the arrival of the kharif crop. How do you see prices in the coming months? 

Balan: I see the prices of all pulses increasing in the coming months.

GPC: Do you think that, with domestic production going up, the demand for pulses can be met without imports?

Balan: Where are the statistics showing the increase in domestic pulse production?

GPC: What are your views on the recent changes in the farm laws and the farmers’ protest?

Balan: I think farmers should have the freedom to sell their products to anyone they like.

GPC:  Covid-19 has affected various sectors of the economy. With vaccines becoming available, do you see an economic revival anytime soon?

Balan: Pulse imports were not affected by COVID-19. It is pulse import restrictions that affected the overall import business.

GPC: You are a GPC member. Has that helped your business?

Balan: We were introduced to the GPC by Mr. Vatsal of Evertop Commodities PTE, Singapore. Being part of the organization has helped us greatly to increase our business by connecting us to people globally.