Last year, roughly at this time, the price of tur dal (split pigeon pea) in the retail market was hovering around Rs 180/kg. The prices of other pulses were not far behind. They were all spiralling due to back-to-back droughts during 2014-15 and 2015-16. Production of all pulses had plunged to 16.5 million metric tonnes (MMT), and imports shot up to 5.8 MMT. The rising demand for imports from India also put international prices under pressure, especially for chickpeas from Australia. This caused hardships to poor consumers at home as dal was slipping away from their “dal-bhaat” or “dal-roti”, a survival food-kit of the poor. There were heightened concerns at the policy level to find ways and means to augment pulses supplies in general and tur in particular.
A long-term agreement was signed with Mozambique for the import of pulses. In fire-fighting mode to douse the flames of high inflation, the Government of India set up a committee under the chief economic advisor 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. So, it was clear that business as usual will not deliver.
One of the key findings of the committee was if farmers have to be incentivised to grow more pulses, and on a larger irrigated area, they must receive a sufficient profit from growing pulses. Given the levels of technology, it was realised that if farmers get about Rs 7,000/quintal for their produce, then pulses can compete with other crops. The ongoing minimum support prices (MSP) of kharif pulses hovered between Rs 4,625/quintal for tur and urad (black gram) to Rs 4,850/quintal for moong (green gram). Giving a massive jump from these levels to Rs 7,000/quintal in one go was considered politically difficult. So, it was thought it would be done over two years. But when the MSP for 2016-17 crops was announced, it was just Rs 5,050/quintal (including bonus) for tur and urad, and Rs 5,225/quintal for moong — far below their market prices.
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 production, for example, shot up by a whopping 65 per cent, from 2.5 MMT to 4.2 MMT, while overall, pulses production went up by 33 per cent, from 16.5 MMT to 22 MMT. The result was a massive drop in the market price of tur, 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 not allowed to hold onto much stock, exports were banned and government procurement was not enough to hold the floor at the MSP. Obviously, such low prices do not give much profit to pulses producers in relation to competing crops. So, hoping that farmers will remain upbeat on pulses and bring more irrigated area under pulses will remain a distant dream. The usual roller-coaster of high and low prices in pulses is likely to continue.
But all is not lost yet. There is still a chance that the government can rescue the situation, if it springs into action right away. Chickpea (chana) has started arriving in the market. It is India’s largest pulses crop, accounting for more than 40 per cent of total pulses production. Last year, chickpea production, as per government estimates, had fallen to 7 MMT, although the market assessment was below 6 MMT. But this year, chickpea production is expected to be around 9.1 MMT, a jump of 29 per cent. As a result, chickpea prices have been tumbling down. Although the prices are still a little above MSP, it won’t be a surprise if they also go below MSP very soon, as did tur prices.
Urgent action is needed if we are serious about solving the pulses problem. The least that the GoI can do is to give farmers a level playing field by removing restrictions on the functioning of free markets. This would imply action on five fronts. One, remove stocking limits on private trade, so that these enterprises can buy from the market and store. This policy should be announced for at least the next three years, if not more, so that private players are encouraged to buy and build ample storage capacity. Two, abolish bans or restrictions on exports of all pulses. If farmers can get a better price by exporting, why are they not permitted do so, especially when the system cannot even guarantee them MSP and imports are open? Let it be very clear that any bans or restrictions on exports are simply an implicit tax on the peasantry and an anti-farmer policy.
Three, 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. They should be forward-looking, not backward-looking. This will be in sync with markets and can reduce the risk of planting decisions. Four, step up government procurement at MSP by engaging even private agencies, to build a buffer stock of 2 MMT. This is a golden opportunity and can also save farmers from a price crash. Five, 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.
Unless these actions are taken immediately, the pulses problem is not going to be resolved. And next year, consumers may once again face higher prices. Can the GoI bite the bullet?