The saga of Pulses in India: Daily Editorial

Context

Around this time last year, pulses price was soaring to as much as 200/kg in the backdrop of successive droughts in 2014, 2015. This year situation is somewhat under control but there are heightened concerns at the policy level to find ways and means to augment pulses supplies.

The Government has taken several measures to tackle the situation on war-footing.

Actions Taken

• A long-term agreement was signed with Mozambique for the import of pulses.
• To fight the high inflation and incentivize the production of pulses for farmers, the Government of India set up a committee under Arvind Subramaniam to solve this problem of pulses.
• It was important to have a fresh look at the pulses sector as over the last 25 years; policy had failed miserably to achieve self-sufficiency in pulses.
• The government also decided to increase the buffer stock of pulses to 20 lakh tonnes from the current eight lakh tonnes.
• Imposed stringent stock limits on pulses, including for importers, the government seized stocks.

[su_box title=”Committee on Pulses headed by Arvind Subramaniam” style=”bubbles” box_color=”#99bb41″ title_color=”#000000″ radius=”20″]

Recommendations of the Committee

Enhancing domestic productivity and production of pulses rapidly and sustainably is the only reliable way of minimizing volatility in pulses market, and safeguarding the interests of farmers and consumers.

A summary of the recommendations of this report

1. MSP and Procurement

• Government procurement machinery should be on high gear to ensure the procurement of kharif pulses at this season’s announced MSP.
• To ensure effective procurement, a High Level Committee comprising Ministers of Finance, Agriculture, and Consumer Affairs and Principal Secretary to PM should be constituted. There should be weekly reporting by procurement agencies on the ground with physical verification of procurement.
• Build up 2 million tons of pulses stock with targets for individual pulses, especially tur (3.5 lakh tonnes) and urad (2 lakh tonnes). These should be built up gradually but opportunistically, buying when prices are low as in the current year.
• Announce MSP of Rs. 40/kg for gram for rabi 2016 and MSP of Rs. 60/kg for both urad and tur for kharif 2017. Minimum Support Prices for other pulses should be increased by the same percent as calculated in this report for tur, urad, and gram.
• MSP to be increased to Rs. 70/kg in 2018 when short duration Kharif tur is ready for commercialization. Efforts to be made to give production subsidies to farmers for growing pulses in irrigated areas of about Rs. 10-15 per kg to be given via DBT.
• Instruct CACP to comprehensively review its MSP-setting framework to incorporate risk and social externalities along the lines done in this report.

2. Other Price Management Policies

• Eliminate export ban on pulses and stock limits; at the very least limits on wholesalers should be eliminated. The greater the limits on procurement by the government, the greater the urgency to take these actions to ensure that market prices stabilize above the MSP. The worst case scenario for farmers is weak procurement and stock limits which force farmers to sell most of their output at market prices that are well below MSP.
•  More generally, the use of trade policy to control domestic prices, which induces policy volatility, should be avoided. Encourage states to delist pulses from their APMCs.
• Review Essential Commodities Act, 1955 and futures trading of agricultural commodities with a view to preserving objectives but finding more effective and less costly instruments for achieving them.

3. Institutions for procurement-stocking-disposal .

• Create a new institution as a Public Private Partnership (PPP) to compete with and complement existing institutions to procure stock and dispose pulses.
• Announce clear rules for disposal of stocks

4. Minimising Adverse Impacts 

• Encourage development of GM technologies. Grant expeditious approval to indigenously developed new varieties of pulses.

[/su_box]

Evaluation of the Actions taken

The committee found out that the key to increasing the irrigated area under pulses was to give High MSP and therefore MSP rate was increased.

• Farmers responded to high market prices by planting more area under pulses, and a good rainfall helped them to reap a bumper harvest in 2016-17. Tur daal production, for example, shot up by a whopping 65%, overall pulses production went up by 33%, from 16.5 MMT to 22 MMT.
• As a result the market price of Tur daal fell from about Rs 10,000/quintal in September-October 2016 to Rs 4,000-4,500/quintal in February-March 2017, even below the MSP.
• Private trade was also not allowed to hold onto much stock, exports were banned and government procurement was not enough to hold the floor at the MSP.
• Such low prices do not give much profit to pulses producers in relation to competing crops. So, it would be a false hope for farmers to bring more irrigated area under pulses and they may quickly go to sowing other crops. The prices of pulses will again start to soar and the up and down would continue.

Way Forward

There is still a chance that the government can rescue the situation, if right reforms are carried out.

The reforms suggested by  experts are: 

• Removal of stocking limits on private trade so that traders can buy from the market and store them. This policy should be announced for at least the next three years in order to let the private players to buy and build ample storage capacity.
• Abolish bans or restrictions on exports of all pulses. If farmers can get a better price by exporting, they should be allowed to do so because the system also is not able to give them MSP high enough and imports are open.
• Any bans or restrictions on exports is a kind of tax on the peasantry and it would be an anti-farmer policy.
• Introduce all pulses in futures trading. This way, farmers will get price signals well in advance. They should take planting decisions based on likely future prices, not last year’s market prices. Unlike now which is backward looking, such a indicator would be forward-looking. This will be in sync with markets and can reduce the risk of planting decisions as well.
• Step up government procurement at MSP by engaging even private agencies, to build a buffer stock of 2 MMT as it could save farmers from a price crash.
• Impose an import duty of 5-10 per cent for the next three to six months to give a cover to farmers in post-harvest months.

These actions are petinent and inevitable, if not the pulses problem will remain and the consumers may once again face higher prices.

[su_box title=”Practice Questions” style=”bubbles” box_color=”#99bb41″ title_color=”#000000″ radius=”20″]

1. Despite several measures taken by the Government, the pulses situation has the usual roller-coaster of high and low prices. Suggest some  measures to tackle the problem.

2. Pulses are the  staple food for many in India, it is not just for food security but important for nutritional security. Substantitate the statement.

[/su_box]