Pulses trade needs regulation, monitoring
Although below last kharif’s record production of 94 lt, this year’s crop size is still considered large, especially compared with the previous five-year average of 56 lt. Planting was done on 141 lakh hectares, the second highest on record.
A large inventory (a combination of indigenous and imported material) over and above the large harvest is already pressuring farm-gate prices. This is despite the position that quantitative restriction on tur/arhar, urad and moong is in place and export of these pulses has now been opened up.
Prices are unlikely to rise anywhere close to the minimum support price (MSP) fixed for these pulses anytime soon. The MSP for tur/arhar is ?5,450 a quintal, but market rates are about 20 per cent lower. The MSP for many of the pulses has been hiked perhaps with the good intention of supporting growers but with limited understanding of the global and Indian pulse market dynamics.
Clearly, MSP has ceased to be an instrument to motivate growers and to influence cropping patterns.
Pulse growers who rose to the occasion to expand acreage and harvest large crops have suffered as a result of the government inability to effectively defend the MSP by undertaking effective price support operations.
Procurement last season left much to be desired. Although about 15 lakh tonnes of various pulses were purchased, it failed to prevent a price collapse given the enormity of the crop size and unfair competition from unfettered import of low priced pulses from abroad.
Now, the time has again come for the designated governmental agencies to repeat the procurement operation but in a more timely, rigorous and effective manner.
It is also time for State governments to pitch in with their own support efforts.
A bigger challenge confronting the Central government is in the form of liquidation of inventory with governmental agencies. The procured material has been in storage for several months now (6-8 months), which involves a huge cost, estimated at ?250 a tonne a month. The cost of the stored material is already up by ?1,500 a tonne, making its sale even more uncompetitive.
Importantly, liquidation of stocks will have to take place in a transparent manner. It is necessary for the government to quickly lay down guidelines for transparent sale of pulses with the ultimate objective that such a sale ensures widespread dispersal of the material across the country. It should also be done in a manner and at a time that does not pressure prices of crops currently under harvest.
At the same time, imports need to be closely monitored. At the moment, there is no system of monitoring. No wonder, the government has little idea what varieties and what quantities have been contracted for import, at what prices and when they will arrive.
In the absence of this information, the government will only be able to react to situations rather than proactively take steps to regulate the trade.
Failure to regulate the trade effectively and in time has actually created hardship for growers and other stakeholders over the last year, and left policymakers clueless about timely interventions. It is time to learn and act.