Import ban on pulses can support prices
After the prices of this humble and commonly eaten daal reached sky high in 2016, there was widespread anger over the extreme price hike in pulses. Production had been hit severely and a supply crunch played havoc with retail prices.
In the next two years, however, prices cooled considerably as the sowing increased on good monsoons as did imports, allowing more pulses to flow into the market. This led to a significant reversal in prices and today the price of a kilo of arhar is nowhere near the 2016 levels.
This decline in prices has been good news for consumers but the farmers have been crying foul amid an increase in supply and imports from countries like Canada, Australia and the African nations. Remember, the production of pulses remained virtually stagnant for many years although demand accelerated, causing per capita availability of pulses to decline and prices to spiral. Although there was some policy push to boost production after 2010, yields, however, remained low because of weather shocks, low irrigation cover, and lack of access to the latest production technologies. This scenario improved since 2016, with a concerted push by the government to encourage the sowing of pulses.
Pulses account for about 20% of the area under foodgrain production but amount to less than 10% of total foodgrain output. Also, despite the government’s push, production of pulses has remained below total annual demand. Output has grown less than 2% average in the last 20 odd years while acreage has grown even lesser at less than a percent.
According to industry estimates, India consumes about 63,000 tonne of all varieties of pulses put together every single day (about 23 million tonne is our estimated annual consumption). With a bad monsoon year, pulses production plateaued in 2015-16, leading to a huge spike in prices during the festival season that year. This trend has reversed on good monsoon and increased imports but unless India takes a 360-degree view on pulses, even a combination of two good years of monsoons and government-to-government pacts with African countries for imports are unlikely to solve the pulses' conundrum in the long term. India remains the biggest consumer of pulses and has traditionally focused on cereals like wheat and rice, relegating pulses' cultivation to the background.
Meanwhile, as consumers have been relieved by the softening prices of pulses over the last two years, this trend has not helped the farmers and now, some reports suggest that the government is mulling a ban on imports of pulses till next fiscal so that farmers can get a good price for their crop in a weak market. This decision is unlikely to lead to the 2016 situation since there seems to be enough buffer stock of pulses, but while farmers are cheering the government resolve, traders are obviously unhappy with any such ban.
Madan Sabnavis, chief economist at Care Ratings, told DNA Money that “Production levels are expected to be lower for tur (pigeon pea) and urad while higher for moong (this year). However, stocks from last two years are high which has kept the prices down. Even today the prices are ruling at less than MSP. In such a situation, allowing import of pulses will be detrimental for the interests of farmers. Therefore, imposing a ban is positive for farmers and will make a difference to their incomes. I do not think overall availability will be affected given the carryover stocks with the government agencies.”
As per a reply in Lok Sabha this August by MoS Food and and Consumer Affairs, C R Chaudhary, the government introduced an annual import quota of 5 lakh tonne for three pulses – 2 lakh tonne for tur and 3 lakh tonne for moong and urad- during 2017-18, which was retained for 2018-19 to contain adverse movement in price realisation to farmers.
Ajay Kakra, leader - food and agriculture, at PwC India, said “The government is moving to increase the area of production under pulses so that import substitution happens. It had also already hiked procurement prices. Both these are good moves for farmers. In any case, depending on overall production and excess import stock from previous years, only about half a million tonne of imports may be needed this year and a move to ban imports would discourage major pulses exporters like Canada, Australia and the African nations”.
So experts believe that any move to ban imports of pulses would be positive for the farmers as well as for the market dynamics. Anyhow, recommendations of the Arvind Subramanian committee on pulses, submitted in September 2016, should be implemented to improve the outlook for pulses. The former CEA had asked for the removal of curbs on exports, allocation of more funds for pulses procurement, raising MSP for some pulses etc.