Ten Questions On The Spike In Price Of Pulses
What should our pulses strategy be like? In the long run, we have to augment domestic production by making this the ‘core’ intervention in the NFSM, announce a higher MSP which encourages farmers, especially in the erstwhile GR areas to produce pulses instead of the water guzzling paddy, have an effective procurement machinery besides encouraging agri-business organisations and farmers to undertake production of pulses in Myanmar and Africa
It is understandable that the political discourse in a country will centre on issues which affect the common man the most. For a country in which pulses are amongst the most important sources of protein, the spiralling prices have led to knee jerk reactions, accusations and counter accusations. While a few thousand Metric Tonne (MT) is being imported, and a few thousand MTs have been ‘recovered’ in drives against hoarders, all this is just the tip of the ice berg. We need to ask some hard questions and respond to them in the context of information that is available in the public domain.
Posing the right questions will help us unravel the ‘mystery’ about the sudden spike. These ten questions are: what is the demand –supply scenario of pulses in India, and the world? How much of the commodity is traded? What happened to production of pulses in India this year? Why are farmers not ‘enthused’ with the production of pulses?Is there a ‘market distortion’? Are there any short cuts to production? What is the PSF, and what can it do with respect to pulses? Do we have a long-term strategy in place? Are we complicating things by our knee jerk reactions?
First things first. India is the world’s largest producer, consumer, processor and importer of pulses in the world. Therefore whatever happens to pulses in India, affects the ‘pulse rates’ everywhere else. We produce about 17-19 MTs, consume about 23-25 MT, and import 5-7 MT every year. The total global production of pulses is in the range of 35-37 MT, but because South Asia is the main‘market’ for pulses, the marketable surplus is just about 10-12 MT annually. Much of it comes from Canada, followed by Myanmar, Malawi, Mozambique and Kenya. Thus the fact is that we do have an annual shortage’, which is to be met from imports, and in a year of bad monsoon, if production falls by 10-15 per cent, markets will respond the way they have. However, the critical point is: do we have an overarching strategy in place for the production, procurement and strategic reserve of pulses? The answer is NO.
Lets look at how public policy treats pulses viz a viz cereals—the crop on which the entire patronage of the state machinery is bestowed. There are annual Rabi and Kharif conferences which are devoted to all aspects of production of wheat and rice, the ICAR institutes and SAUs are in readiness, seeds and fertilizers are requisitioned, power and diesel subsidy is in place, and most importantly an effective instrument to procure cereals is in place. The Food Corporation of India, for all its pitfalls has a robust machinery to ensure the setting up of procurement centres in production areas. FCI has a network of its own warehouses, and also have long term contracts with private players, and in the procurement season, the entire machinery of state governments- from the revenue to the agriculture department is mobilised to undertake this task. Contrast this with the procurement regime for pulses. The apex federation (Nafed), which has been given the mandate, is in an extremely precarious financial health with the threat of liquidation looming over it. For the last five years, several rehabilitation packages have been discussed, but none has borne any positive result. The highest procurement of pulses by Nafed in recent years was about .35 MT (one third of an MT) as against a production of 17-19 MT. In other words, almost the entire trade is in private hands, which by itself, is not necessarily bad. As Ashok Gulati pointed out in a recent article, hounding those who pick up the stock is counter- intuitive, for if the traders, stockists and wholesalers do not buy the pulses, who will? Again, there has been no pan-India analysis of what these stock limits ought to be? Moreover, if we are promoting a national agriculture market, should we be imposing stock-limits? What governments need to know is where the physical stocks exists—and take steps to release them into the Public Distribution System (PDS) by offsetting the stockholding and transport costs. And if such limits continue to be imposed, how will the private sector, which controls 99.99 per cent of the trade ever be effective. We have to work with markets, not against them. The sarkari supply chain of Safal stores and Kendriya Bhandars is effective in the Lyutens zone and a ten kilometre radius: but beyond that is the abyss. The earlier this realisation dawns, the better it would be!
What should our pulses strategy be like? In the long run, we have to augment domestic production by making this the ‘core’ intervention in the NFSM, announce a higher MSP which encourages farmers, especially in the erstwhile GR areas to produce pulses instead of the water guzzling paddy, have an effective procurement machinery besides encouraging agri-business organisations and farmers to undertake production of pulses in Myanmar and Africa. As of now EXIM bank is only looking project finance—where the bulk investments are in plant and machinery. This has to be tweaked to include production-costs, including land leasing, technical advisory services, equipment rentals, working capital and the like. We must have a target of outsourcing the production of at least 2-3 MT of pulses. This will also ease the global prices in years when India has a production constraint. In this day and age of climatic aberrations, it is important that production is spread across regions to ensure mutual hedging.
For the current year, we need to allow imports under the OGL and allow agri-business organisation, retailers, and state marketing federations to access funds from the Price Stabilisation Fund (PSF) to import pulses. The PSF kitty itself must be enhanced multi-fold and at least another zero needs to be added to the figure of 5000 MT which the GoI is planning to import in the first round!
The current PSF strategy is clearly inadequate at this scale. For the next season, the planning must begin NOW, and wherever possible, production of pulses should be an essential part of the Rabi production strategy!
(The author, an IAS officer , was till recently, a Joint Secretary in the Ministry of Agriculture and Farmers Welfare. The views expressed are personal.)
By Sanjeev Chopra