As India stares at the prospect of a sub-par monsoon — cumulative rainfall so far this season (June-September) has been 43 per cent below normal, on top of a 25 per cent deficiency in the pre-monsoon period (March-May) — it can take heart from two things that can significantly combat any threat of food inflation.
The first is the stocks of wheat and rice with the Food Corporation of India (FCI) in the Central pool. That, at 741.41 lakh tonnes (lt) plus another 120.08 lt of unmilled paddy (equivalent to roughly 80.45 lt of rice) as on June 1, is highest ever level for this date since 2012.
It is also nearly twice the normative minimum operational-cum-strategic buffer of 411.20 lt to be maintained at the beginning of July.
But what is perhaps more heartening is the large stocks of pulses held by the National Agricultural Cooperative Marketing Federation of India (Nafed). As on June 11, these, on its own account, totalled 27.46 lt — comprising 20.35 lt of chana (chickpea), 3.02 lt of urad (black gram), 1.47 lt of moong (green gram), 1.42 lt of arhar/toor (pigeon-pea) and 1.19 lt of masur (lentil).
In addition, the apex produce marketing cooperative was holding another 13.90 lt as buffer stock on the Centre’s behalf. That included 7.05 lt of arhar/toor, 2.41 lt of urad, 2.37 lt of chana, 1.43 lt of moong and 0.57 lt of masur.
“Never before have we had so much of pulses stocks (41 lt-plus) before the beginning of the agricultural year. This should help us comfortably tide over any domestic production shortfall in the event of a poor monsoon,” said Sanjeev Kumar Chadha, managing director, Nafed.
The prices of pulses went through the roof in 2014-15 and 2015-16, the first two years of the Narendra Modi government’s first term, which also witnessed back-to-back droughts. Retail prices of arhar, which scaled Rs 180-200 per kg levels in October 2015, were seen to have contributed to the BJP’s defeat in the Bihar Assembly polls that year.
Wholesale inflation in pulses has climbed from 2.11 per cent to 18.36 per cent year-on-year between December and May this year. But most pulses, barring arhar/toor, are still trading in mandis at below their official minimum support prices (MSP).
Also, unlike five years ago, government agencies have sufficient stocks to allow market intervention. The Modi government, for the first time, in October 2015, decided to create a buffer stock of pulses, initially through imports and later, by domestic procurement.
From 2014-15 to 2019-20 (until June 12), aggregate procurement of pulses under the Centre’s price support scheme and price stabilisation fund programmes, at 87.86 lt, has been more than 12 times the 7.16 lt bought during the preceding 13 years. The bulk of this procurement has taken place after 2016-17 (see table).
“The stocks that we have built through our MSP-based procurement operations should also enable keeping imports within limits,” Chadha said.
India’s imports of pulses soared from 36.55 lt in 2013-14 to 66.09 lt in 2016-17. Subsequently, they fell to 56.08 lt in 2017-18, and to 25.30 lt in 2018-19, on the back of increased domestic production and procurement by Central agencies. For the current fiscal, the Centre has imposed quantitative restrictions, limiting annual imports to 2 lt of arhar/toor and 1.5 lt each of urad, moong and peas. Chana imports, too, now attract 60 per cent customs duty.
Besides pulses, the Centre is seeking to create a 50,000-tonne buffer stock of onions, which has also recorded a spike in wholesale inflation from minus 63.83 per cent to 15.89 per cent year-on-year between December 2018 and May 2019. Out of the 50,000 tonnes target, Nafed has already procured 46,000 tonnes.
On June 11, the Commerce Ministry withdrew the 10 per cent MEIS (Merchandise Exports from India Scheme) subsidy on onion. The move was intended at discouraging exports of the bulb, which rose from 16.92 lt (valued at Rs 3,359.60 crore) in 2017-18 to 22.04 lt (Rs 3,521.33 crore) in 2018-19.
In its first term, the Modi government was very hawkish on food inflation, invoking the Essential Commodities Act to clamp stockholding restrictions on pulses, onion, and sugar, apart from practically banning their exports while permitting unlimited duty-free imports.
The general expectation is that it may be more circumspect in the current term, despite wholesale inflation for food articles shooting up from minus 0.42 per cent to 6.99 per cent between December and May. One reason for this could be that in Maharashtra, which is slated to go to polls in October, the votes of sugarcane, onion and pulses growers may count just as much as those of urban consumers.