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Skyrocketing price: Is dal the new pyaaz?

The price of dal is the big talking point in the Bihar elections. But the govt must think farther than immediate electoral considerations — and focus on incentivising production in the long run.

Written by Harish Damodaran | Updated: October 20, 2015 12:17:49 pm

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Till about a month back, it was onions at Rs 50-plus a kg that was giving the BJP-led government the jitters. Now, arhar and urad at Rs 150 and more is the major talking point in the Bihar Assembly polls. Whether dal would be the pyaaz of this election, as some reports have begun to suggest, will be clear next month.

The reasons for the spurt in dal prices are well known.

Watch Video: Has Dal Become The New Pyaaz

Firstly, we have had back-to-back monsoon failures, the first since 1986 and 1987. Pulses have borne the brunt, as not even a tenth of the area under arhar (pigeon-pea), urad (black gram) and moong (green gram) — mainly grown during the kharif season — have irrigation cover. The unseasonal rain and hailstorm in March caused damage to the standing rabi crops of chana (chick-pea) and masur (lentil) as well. In short, we have the cumulative impact of three successive bad crops: kharif and rabi of 2014-15 and this year’s kharif.

Secondly, the options for import are limited in pulses. Unlike edible oils, sugar, wheat or corn, there isn’t much production of pulses outside of India. The total global pulses output is about 70 million tonnes (mt), of which the estimated cross-border trade is hardly 15 mt — less than India’s annual production of 18-19 mt. Our imports peaked last year at 4.6 mt, which included 1.95 mt of yellow/green peas (matar) and 0.82 mt of masur (mostly from Canada and the US), 0.62 mt of moong and urad (largely from Myanmar), 0.58 mt of arhar (from Myanmar, Tanzania and Mozambique) and 0.42 mt of chana (from Australia and Russia). Imports in any year cannot plausibly exceed 5 mt.

Given this basic reality — consecutive poor monsoons and limited leeway for imports — one cannot really blame the government for the current situation, even if voters may think otherwise. The Centre, if anything, has done everything one would normally expect it to do. It has banned exports and futures trading in pulses, and allowed imports at zero duty. The government itself has imported some 5,000 tonnes of pulses, while subsidizing their domestic cost of transport, handling and milling through a price stabilisation fund. Besides, there has been a crackdown on so-called hoarders and black-marketers through imposition of stockholding limits. On Sunday, these limits were extended to even stocks sourced from imports or held by licensed food processors and large departmental retailers.

If all these measures, reminiscent of the Indira Gandhi era, have not so far had the desired impact, it only points to the real underlying factors contributing to a perfect storm as far as dal goes.

But this is the time for the government to also think ahead. Imports clearly aren’t a solution, as the world simply does not produce enough pulses to meet India’s requirements. The very fact that landed prices of imported arhar are today around $ 2,100 per tonne, as against $ 700-800 a year ago, is proof of international suppliers taking advantage of India’s production shortfall even in an overall bearish global market for agri-commodities. The government’s repeated talk of contracting more imports — and even creating a buffer stock through floating of tenders for these — has, far from cooling down domestic prices, only led to a further flaring up of global prices.

Instead of imports, the government should focus on augmenting domestic production. Farmers have already started sowing chana in Karnataka, Andhra Pradesh, Telangana and Maharashtra. From early next month, plantings will also commence in Madhya Pradesh and Rajasthan. It is strange that the government is yet to even announce the minimum support prices (MSP) for rabi crops, including chana and masur — which only demonstrates its obsession with imports, when there isn’t any alternative to “making in India” in the case of pulses.

The government should, hopefully this week, announce a significant increase in the MSP for masur and chana, currently at Rs 3,075 and Rs 3,175 per quintal respectively. Given that these dals are retailing at well above Rs 60 per kg, there is scope for an MSP of Rs 4,000 per quintal even after deducting milling and assorted distribution costs/margins. Such a sharp jump — along with the government committing to procure at the announced higher rates — can be combined with a freeze or negligible increase in the MSP of wheat.

These steps will induce farmers even in irrigated areas to switch from wheat to chana or masur. It is necessary to recall here what happened in 2013-14, when chana prices ruled at Rs 2,500-2,600 per quintal, against the Centre’s MSP of Rs 3,100. The following year, farmers went back to growing more wheat, knowing that there would be enough government buying at an assured MSP.

We need a radical shift today where pulses become a viable option for even farmers in Punjab, Haryana or western Maharashtra, rather than being pushed increasingly to marginal lands prone to moisture stress. Only then, can average yields, too, go up from the existing 750 kg per hectare to two tonnes and above. But that cannot happen with routine tweaking of MSPs. The Modi government can make a beginning now, which should help it at least in the next big elections to the Uttar Pradesh assembly.

harish.damodaran@expressindia.com

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