Oct 24, 2015

Pulses production: Taking care of consumers, leaving farmers in the lurch

No sooner had the Finance Minister Arun Jaitley declared that 36,000 tonnes of hoarded pulses had been seized in a nationwide crackdown, a loud chorus began defending hoarders and black marketers. Interestingly, the chorus is being led by the same group of mainline economists and trade bodies who have been on the forefront demanding dismantling of the APMC regulated markets so as to free the supply chain of the manipulative power of a cartel of wholesale traders.

This was on the expected lines. Whenever food prices are on an upswing, except when the blame can be easily pointed to APMC markets, there has always been an organized uproar against any crackdown on traders. The prevailing mindset is that it’s only the dhoti-kurta clad arhtiya or middleman who is the problem. The suited-booted middlemen can do no wrong. In the case of pulses, it is mainly hoarding by the big retail and e-commerce and therefore the strong defense. Since there was no shortfall in the availability of pulses (domestic production plus imports) I see no other reason why the prices of pulses should have skyrocketed. The trade cannot be allowed to go untamed.

Imposing stock limits and ensuring no illegal hoarding takes place at any time of the year is an efficient administrative system that has to be permanently put in place. Although seen by many economists as simply a knee-jerk reaction, the ban on futures and forward trading in pulses that was imposed earlier by the government is a very sensible step. Futures in agricultural commodities have always been associated with flaring prices. It is primarily for this reason that a working group of chief ministers, led by then Gujarat chief minister, Narendra Modi, had in a report submitted in 2011 called for banning futures trading of essential commodities to tame rising food prices.

Even during the 2007 global food crisis when 37 countries faced food riots, a report submitted by then Special Rapporteur on Right to Food to the UN Human Rights Council had blamed futures in farm commodities to have caused at least 70 per cent jump in global food prices that eventually led to an unprecedented food crisis.

Although the production of kharif pulses is expected to register a fall in view of the drought and early withdrawal of monsoon in the later stages of crop growth, I still don’t see any reason why the retail prices should not come down. Given that the private trade has already contracted for importing 2.5 million tonnes of pulses, which will be in retail stores latest by December, any shortfall in production will be adequately met from imports. If the government continues to use anti-hoarding laws effectively, and keeps an effective track of supplies, the open market prices can be easily brought down to last year’s level.

Instead of announcing imports as a panic reaction whenever food prices go up, which in turn sends international prices spiraling and makes imports expensive, the policy mechanism should aim at increasing domestic production and reducing imports. At the same time, since the common man’s dal – a primary source of protein – is an essential part of Indian diet, all efforts should be to enhance its domestic production so as to increase its per capita availability. With incomes being low, pulses remain the major source of a protein-rich diet for the poor and also the middle class. At present, the per capita availability of pulses hovers at 31.6 gram per day which is awfully low.

While the policy thrust should be to increase domestic production with the aim to raise the per capita availability to 100 grams per day in the years to come, I find the government is easily washing its hands from any such responsibility be merely creating a buffer stock of 40,000 tonnes of pulses to be purchased directly from farmers. This buffer stock will certainly address the problem of rising consumer prices but it doesn’t provide any succor to farmers to incentivize cultivation of pulses. Since a Price Stabilisation Fund is also a consumer subsidy it seems the effort is only to keep the consumers happy.

For its buffer stock, Centre will procure directly from farmers at a minimum support price (MSP). In other words, selective number of farmers will get a benefit of an assured procurement. The rest of the farmers will be left in the lurch to face the vagaries of the markets. This is rather unfair. What is needed is an assured procurement along with a high price for farmers if the government is to make any serious efforts to raise domestic production of pulses. #

After crackdown on traders, govt must raise prod of pulses. ABPLive. Oct 23, 2015.


Ravish B said...

This is great thanks for sharing. Nice Post

Sanjeev Sandal said...

The potential states for pulse production in India has been well recognized but unfortunately we do not have the data for number of farmers growing pulses only. If the farmers are registered for a particular pulse the way the ratio cards are given for obtaining the pulses, we may have more reliable estimates not in term of production but the human life involved in a particular season. The over production can be stored but human life can not be stored if cash is not given to farmers. We say vegetables are cash crops but why not pulses, we should promote direct selling of pulses in same way that of vegetables.