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.
- 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.
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.
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.