Tuesday, October 20, 2015

Background !!

India consumes around 23 million metric tons (MMT) of pulses. This is an aggregate of a variety of pulses including gram (chana), tur or arhar, mung, masur and urad. Pulses are the main source of protein for a very large number of people in the country - each 100 grams contains about 32 grams of proteins and several amino acids not made by the body. So, it is an essential part of Indian meals. Naturally, India is the largest producer and consumer of pulses in the world.

Phir kya hua ?

But India's production of pulses has stagnated at around 18-19 MMT for several years now. The shortfall between production and consumption is made up by imports, mainly from Canada, Myanmar and some African countries.

This balance has been maintained at a huge cost to the people. A population growing at the rate of about 2% per year in the past decade should have quickly overtaken the pulses rate of growth which was less than half of that. This has not happened because the amount of pulses consumed per person has relentlessly declined over the past several decades.

From about 61 grams per person per day in 1951 to about 42 grams in 2013.

This year the balance has been rudely and dramatically upset. In 2014-15, production of pulses was clocked in at 17.4 MMT - a decline of 2.4 MMT or 12% over the previous year. 

This was caused by various factors including 
  • unseasonal rains, 
  • pests, 
  • unprofitable prices for offered to farmers even as import duties were waived.


Who are to blamed for the price rise ? the TRADERS ?
  • This decline appears to have been seized as an opportunity to make a quick killing by traders - both domestic and global. 
  • There are reports of pulses stocks lying in warehouses at ports as traders wait it out and allow shortages to pump up prices even more. 
  • And, exporters in touch with producers from Canada (mainly lentil or masur), Myanmar (mainly tur) and Australia (mainly chickpeas or Kabuli chana) have hiked up the rates because India is the biggest player in the pulses import market.
So, in 2014-15, India has imported 4.6 MMT pulses, up 31% compared to the previous year. International prices have risen in tandem from Rs 32 per kg to Rs 50 for chana, from Rs 56 to Rs 75 for lentil, from Rs 40 to Rs 90 for tur, and from Rs 50 to Rs 77 for urad between October 2014 and August 2015 according to the latest agriculture ministry profile.

What is government doing ?
·    The government on its part is tinkering around at the periphery by ordering about 7000 metric tonnes of pulses in the international market and "invoking" the Rs.500 crore price stabilization fund to subsidise transport of pulses stocks from ports to retailers. .... Plus raids on hoardings !!

What experts suggest ?

Experts have called for a new impetus to pulses production with new seeds, better pest control, better support prices and a much better organized market so that the future expected requirement of pulses can be met. Otherwise India faces a protein famine in the coming years.

Moral of the Story !!
  • A lasting solution, of course, lies in rationalising farm policy, with imports and exports as a vital ingredient of it. 
  • Right now, with farmers getting Rs 15,000 per hectare of subsidies for growing wheat and rice, and none for pulses – which actually helps fix nitrogen levels in the soil – it is obvious the incentives structure is all wrong. 
  • Indeed, pulses have a double risk as they are grown on largely unirrigated land (drought risk) and on most occasions, with market prices falling below the minimum support price, there is significant market risk as well. 
  • Instead of a difficult-to-run price stabilization fund (temporary solution), it would be better to either build up buffer stocks (long term solution) to prevent this kind of price surge, or to give crop-neutral cash subsidies to wean farmers away from wheat and rice. 
  • Any policy that does not address these issues will have only a short term impact.

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