Pulses are an interesting and unique commodity group in the Indian agri-food space. The country ranks first not only in their production and consumption, but also their import. Domestic absorption in recent years (2012-13 to 2015-16) has hovered between 21 million metric tonnes (MMT) and 23 MMT, while domestic production has ranged from 16.4 MMT to 19.3 MMT. But last year (FY 2016-17) was an anomaly that has confounded many a keen observer of this sector. In 2016-17, India witnessed its highest ever domestic production of pulses — a staggering 22.95 MMT. The record production can plausibly be attributed to a normal monsoon in 2016 after two consecutive drought years, high market prices of pulses prevailing at the time of the kharif sowing and steep hikes in the Minimum Support Prices (MSP) — up to 9.2 per cent for kharif and 16.2 per cent for rabi pulses. These favourable conditions significantly drove up kharif acreage to almost 36 per cent above normal. The production of kharif pulses increased by nearly 70 per cent in 2016-2017 over that of the previous year and the total production of pulses increased by about 40 per cent.
Normally, in a year of such bumper production, imports would be expected to fall significantly and one would assume India to have become self-sufficient in pulses — a goal that had its origin in the Technology Mission on Pulses, nearly 27 years ago. However, the reality was very different. India imported a record 6.6 MMT of pulses, valued at nearly $4.3 billion (see Figure 1) at zero import duty. As a result, domestic supply of pulses in 2016-17 shot up to 29.6 MMT, way above the typical supply of 22-23 MMT. No wonder this glut in domestic supplies caused wholesale prices to crash, despite a bold and first-of-its-kind effort by the government to procure around 1.6 MMT of pulses.
In February 2017, tur prices were Rs 3,914 per quintal in Akola in Maharashtra and Rs 3,256 per quintal in Hubli in Karnataka, much below the MSP of Rs 5,050 per quintal. Moong prices crashed to Rs 3,000 per quintal in Pali and Rs 3,400 per quintal in Tonk in Rajasthan — MSP for moong being Rs 5,225 per quintal.Urad prices plunged to Rs 3,690 per quintal in Harda and Rs 4,000 per quintal in Raisen in MP against an MSP of Rs 5,000 per quintal. In such a climate, the MSP announced by the government for moong, Rs 5,575 per quintal, for the kharif marketing season, 2017-18, shows that the policymakers are totally divorced from the plight of peasants or are simply anti-farmer. This price does not even cover the projected cost of production, Rs 5,700 per quintal. If there is no change in the government’s methods, we may either witness a decline in production of kharif pulses or another price crash this year. That may spur another round of farm loan waivers. The historic roller coaster of pulse prices (see Figure 2) is most likely to continue.
What, then, is the solution to this problem? First, the landed price of imported pulses should not be below the MSP of domestic pulses, else the MSP is irrelevant. A peculiar situation arises in the case of yellow peas, which constituted the largest share (3.2 MMT) of total pulses imported in 2016-17. Its landed price was around Rs 2,550 per quintal, while the MSP for chickpea was Rs 3,500 per quintal. While the two are not the same, yellow pea is widely used as an adulterant in the preparation of besan. This should have called for a 30-40 per cent import duty on yellow pea. Without such a duty, the imports of the yellow pea hit the Indian farmers adversely.
Second, if the government really favours free trade, as duty-free imports suggest, why have exports of pulses been banned for over 10 years? For our farmers to have a level-playing field, exports of all pulses must be opened up without any quantity or minimum export price (MEP) restrictions. Export restrictions betray anti-farmer policies.
Third, pulses should be de-listed from the Agricultural Produce Market Committee (APMC) Act so that farmers can sell freely to whosoever they like, enabling a better realisation for the agriculturalists and a compression of the pulses value-chain. Fourth, the relevance of the Essential Commodities Act (ECA), especially the provision that imposes stocking limits, must be critically evaluated and the act should be amended drastically. Unless private players are reassured that no ad-hoc stocking limits will be imposed, there will be no investments in building storage and efficient value-chains. Prices, consequently, will crash during harvest time, hitting farmers adversely.
Fifth, it is crucial to give the farmer right incentives — at least some reasonable margin above the cost of production. The MSP for moong for the kharif marketing season 2017-18 fails farmers on this count. Finally, futures trading should also be allowed for all types of pulses so that planting and selling decisions of farmers are based on a futuristic rather than a backward-looking price information. With these policy changes, and a fairly reasonable buffer stock in place, the government can surely manage the pulses sector better.