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Monday, March 30, 2020

MSP intervention: A different surplus

The unprecedented procurement of pulses and oilseeds in the last couple of years has created problems — and opportunities.

Written by Harish Damodaran | New Delhi | Updated: January 10, 2019 12:45:42 am
farmers crisis, minimum support price, agriculture crisis, Narendra Modi government, procurement of pulses, MSP, Indian express The unprecedented pulses procurement — 1.9 million tonnes (mt) in 2016-17 and 4.5 mt in 2017-18 — was partly due to India’s pulses output going up from just 16.35 mt in 2015-16 to a record 23.13 mt and 25.23 mt in the following two years.

If there’s one area in agriculture where the Narendra Modi government has probably broken fresh ground, it is in the procurement of pulses and oilseeds.

During the 2016-17 and 2017-18 agricultural years (July-June), the Central agencies — National Agricultural Cooperative Marketing Federation of India (Nafed), Small Farmers’ Agribusiness Consortium (SFAC) and Food Corporation of India (FCI) — together procured 18.78 lakh tonnes (lt) and 44.96 lt of pulses, plus 2.16 lt and 19.99 lt of oilseeds, respectively. a

This extent of procurement, under the Centre’s PSS (price support scheme) and PSF (price stabilisation fund) programmes, has never taken place before. There were years previously when significant quantities of particular pulses and oilseeds got bought — notably the 3.64 lt of chana (chickpea) and 3.61 lt of groundnut pods by Nafed and SFAC in 2013-14, when the Congress-led United Progressive Alliance was in power.

But in the last two years, especially 2017-18, governmental purchases at minimum support prices (MSP) have been across the board for major pulses — arhar/tur (pigeon-pea), moong (green gram), urad (black gram), chana and masoor (lentil) — and oilseeds, including groundnut, rapeseed-mustard and soyabean (see table).

The bulk of this procurement has, interestingly, been carried out by an organisation that was in the red until recently, with accumulated losses of Rs 1,090.93 crore as of March 31, 2017 more than eroding its share capital and reserves of Rs 416.83 crore. Nafed, moreover, had unserviceable debts of over Rs 3,000 crore owed to commercial banks.

“The principal amount was around Rs 1,700 crore and the rest accrued interest. We did a one-time settlement with the eight lenders for about Rs 600 crore, including a cash payment of Rs 220 crore and assignment of sale/auctions rights of a property in New Delhi’s Lawrence Road and a mall in Mumbai,” said Sanjeev Kumar Chadha, managing director of the apex marketing cooperative.

The Centre not only backed the settlement — finalised at a meeting convened in December 2017 by Nripendra Misra, principal secretary to the Prime Minister — but also enhanced the government guarantee to Nafed for availing credit, from Rs 2,500 crore in 2013-14 to Rs 39,000 crore in 2017-18 and further to Rs 40,500 crore for this fiscal.

“This was done to enable us to undertake pulses and oilseeds procurement under the PSS. FCI is much bigger than us, but it is mainly into procuring paddy and wheat for the public distribution system (PDS), whereas we have better experience of MSP-based intervention in pulses, oilseeds and even de-husked coconut/copra, cotton and onion. We are happy that the government recognised this,” noted Chadha.

The unprecedented pulses procurement — 1.9 million tonnes (mt) in 2016-17 and 4.5 mt in 2017-18 — was partly due to India’s pulses output going up from just 16.35 mt in 2015-16 to a record 23.13 mt and 25.23 mt in the following two years. But even as production rose, the country continued to import, with that figure, too, hitting an all-time-high of 6.36 mt in 2016-17 and 5.42 mt in 2017-18. As total pulses availability soared way beyond the annual domestic consumption requirement of 23-24 mt — and the Modi government took time to review its inflation-targeting pro-consumer import policy (<;) — open market prices crashed below MSPs.

The end-result has been massive build-up of stocks with Nafed, similar to FCI’s vis-à-vis wheat and rice. Out of the 18.78 lt of pulses procured in 2016-17, there is still a balance 1.99 lt unsold quantity (mainly 1.58 lt arhar). The same from the 44.96 lt procurement of 2017-18 is 30.87 lt, comprising 21.24 lt chana, 5.19 lt arhar, 1.78 lt urad, 1.49 lt masoor and 1.17 lt moong. Besides, Nafed is holding 3.62 lt of groundnut and 3.61 lt of groundnut from its procurement during 2017-18.

Such huge unsold stocks render market intervention itself difficult. “When market prices are Rs 100-200 per quintal below the MSP, our very presence is enough to drive up the former. But when the difference is Rs 500-1,000/quintal, forcing large-scale procurement by us, the private trade stops buying, as it starts believing that we will have to offload this entire stock at some point. In other words, they don’t have to invest any working capital or incur storage costs. And when they do not buy, it further pulls down the market,” explained S K Verma, Nafed’s executive director.

This can be seen in chana, which is now trading in Madhya Pradesh’s mandis at Rs 3,800-4,000 per quintal, as against its MSP of 4,620. The pressure on prices will be more, when the next crop starts arriving in March and traders know that Nafed is saddled with huge stocks from last year’s procurement.

“The challenge is to ensure that what we buy does not go back to the same market and, instead, moves from producing to consuming centres. That is why we have started offering our pulses stocks to consuming state governments at a Rs 1,500/quintal discount to the average market price in the producing states. The states lifting the discounted stocks can further distribute it through their PDS outlets,” added Verma.

Nafed has earmarked 34.88 lt of pulses from its PSS stocks under the discounted issue price scheme. States seem to have shown some interest, with around 5.50 lt of indents already placed by them. Whether that will eventually make pulses a regular part of the PDS menu — just like rice, wheat or even sugar — remains to be seen. Potentially, it can be a win-win for both farmers and consumers who can do with a more protein-rich diet.

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