It’s an integral part of daily meals, particularly in north India. While we are the second largest producer of red lentils in the world, we are also its biggest importer. And with government policies still focused on just rice and wheat, importing lentils is not only a lasting but also a lucrative business proposition

Sachin Manawaria | @TheDollarBiz 

Next time you savour masoor dal, odds are high that it would have been cultivated in a farm in faraway Canada. Although it might sound surprising to many, India is actually the biggest importer of lentils in the world. The country imported close to $450 million worth of this edible pulses in FY2014, most of it coming from Canada. What’s even more interesting is the fact that India is actually the second largest producer of lentils in the world, next only to Canada! So, this increasing love for lentils means that domestic production has been found to be increasingly inadequate, resulting in ever higher imports. A recent report by Confederation of Indian Industry (CII) titled ‘Overcoming Indian Pulses Crises’ reveals that while India’s population grew at a CAGR of 2% during 1971-2008, pulses production grew at a meagre 0.7% – something which cannot be reversed in the absolute short run.

Even in terms of nutritious value, lentil seeds are high in carbohydrate, fiber and protein content which is why it is so popular in India, particularly among vegetarians. What also goes in its favour is the fact that it is considerably cheaper than other sources of protein. In fact, lentil is considered as one of the oldest food legumes known to mankind.

The Indian story

Domestic production of lentils has hovered around 9 to 10 lakh metric tonne since FY2007 without any significant increase despite a substantial hike in minimum support price (MSP) for it from Rs.17,000/tonne in FY2009 to Rs.29,000/tonne in FY2014. Even this big uptick in MSP coupled with a massive surge in demand has failed to motivate farmers to take up lentils production in a significant way, primarily because of the government’s bias in favour of rice and wheat. The government’s procurement policy is also skewed, which is reflected in our public distribution system and populist commitments of distributing wheat and rice to the poorer sections of the society at subsidised prices. Further, because of ever rising domestic consumption (thanks to changes in food habits and no reversal in our population trend) it has become almost impossible to depend solely on domestic production. Experts believe the situation is not going to improve despite the government rolling out several incentives for lentils’ growers.

According to the International Center for Agriculture Research in the Dry Areas (ICARDA), during the last three decades, lentils yield has increased by just 34% despite revolutionary changes in cultivation techniques. While the global average yield of lentils is around 820 kg/hectare – the same in Canada and US stands at around 1,800 kg/hectare – in India it is just 600 kg/hectare. Interestingly, in CY2002, India used to command almost 34% global market share in lentils production, while Turkey and Canada had a 12% and 9% share respectively. But higher productivity in Canada prompted farmers in that country to take up lentils seriously. This, coupled with higher technological advancement in the farm sector, has now made Canada by far the biggest lentils’ producer in the world. This means that just in a decade, since 2002, Canada’s share in global lentils production has surged from 9% to 32%, while that of India has dropped almost 14 percentage points.

Some of the key reasons attributed to India’s decline in market share and low productivity are lack of seed replacement with high yielding suitable varieties and non-availability of quality seeds, coupled with archaic production techniques.

(Read exclusive interview:Lentils should be Included in India’s PDS and FSA – Pradeep Ghorpade, CEO, Indian Pulses & Grains Association) 

Northern dominance

When it comes to lentils production in India, Uttar Pradesh, Bihar and Madhya Pradesh account for almost 80% of India’s production of lentils. Although pulses and lentils are grown during both the Kharif as well as the Rabi seasons, more than two-thirds of India’s lentils are produced during the Rabi season. During FY2014 Rabi season area under pulses and lentils cultivation was at a record level, mainly driven by last year’s good monsoon which was well spread across the country. This helped water levels, necessary for Rabi crops, to rise apart from augmenting irrigation capacities in lentils’ growing states.

However, the monsoon deficit of 45% reported by the India Meteorological Department (IMD) during the first week of June 2014 presents a grave scenario for lentils growers for the upcoming Rabi season. A near drought like situation would further adversely impact lentils productivity, forcing India to go in for more imports. India’s export share may also go down further, if the rain gods fail to deliver in quick time especially in the pulses and lentils growing states.

All in numbers

According to the Directorate of Economics and Statistics (Ministry of Agriculture, GoI), during FY2014, India produced nearly 19.57 million metric tonne (MMT) of pulses (including lentils) and imported another 3.04 MMT. The Ministry of Commerce is already expecting an increase in imports of pulses to 3.41 MMT during FY2015. And the expectation is that within the pulses pack lentils imports will continue to grow at a CAGR of 20% – the trend for the last five years. On the other hand in Canada, lentils production surged by 22% during the 2013-14 season as compared to the previous year. This, despite the fact that the area under harvest was down by about 5%. However, Canada’s current existing supply stands at 2.2 MMT, down by around 9% from the 2013 levels. This means prices of lentils may perhaps rise in the global markets as Canada is the biggest exporter of the lentils in the world. 

The protagonists

Despite supply issues Canada is expected to achieve its exports target of 16 MMT to India, Turkey and EU. In fact, Canada exported lentils worth $352 million to India during FY2014 and $230 million a year before that. India has been importing nearly 75% of its lentils requirement from Canada alone during the last few years. Another 10% is sourced from Australia and US respectively.

According to the US Department of Agriculture (USDA), the area under lentils production in US during 2014-15 is forecast at 0.3 million acre, down by 12% as compared to the previous season. This, due to lower area seeded in one major lentils’ producing state – Montana. Assuming yields to stay normal, US lentils production is projected to be around 0.2 million tonne – down about 19% from last year. 

Similarly, the Australian Bureau of Agricultural Resource Economics and Science (ABARES), forecasts a decline of nearly 30% in lentils production this year, primarily due to a significant drop in yields. However, this is hardly going to have any negative impact on exports to India as only 10% of our country’s requirements are imported from Australia. For the rest of the world, production forecasts for this season are relatively good. However, it too will not have any adverse impact on Indian imports even in case of a marginal crop failure due to scanty rainfall in our country. 

Feasible option

Importing lentils from Canada appears to be a lucrative business given India’s consumption patterns and the ever rising vegetarianism. Moreover, being a developing country where food prices do matter to a majority of the population, lentils consumption can only head northwards given the fact that it is cheaper than most other major popular sources of protein. In fact, at current prices, profit margins in lentils imports are also relatively high ranging from 20% to 30%. Further, the stagnation in lentils production during the last two decades also presents an excellent opportunity for entrepreneurs to explore this option and capitalise on it in the years to come. Interestingly, while WHO recommends per capita consumption of at least 80 gm of pulses when it comes to adult Indians, our current average is just 43 gm. This too makes a strong case for lentils imports and indicates prosperous times for those importing it! Are you one of them?