Pulses’ prices shoot up as production falls

Published October 12, 2015
Indian spectators listen as Prime Minister Narendra Modi addresses an election rally in Aurangabad in Bihar on October 9. Facing a crucial polling test today, Modi has mounted a no-holds barred campaign, promising Biharis billions of dollars for development.—AFP
Indian spectators listen as Prime Minister Narendra Modi addresses an election rally in Aurangabad in Bihar on October 9. Facing a crucial polling test today, Modi has mounted a no-holds barred campaign, promising Biharis billions of dollars for development.—AFP

MILLIONS of consumers and farmers in India have to pay dearly for the abysmal lack of government planning and poor coordination among various agencies, which results in an acute shortage of commodities such as pulses every year.

This year has been no different. With a 14pc deficit in south-west monsoon, the kharif pulses production — which accounts for less than a third of total production, with the rabi season contributing the bulk of pulses — is estimated to stagnate at a little over 5.55m tonnes, as against 5.63m tonnes in the previous kharif season.

Pulse prices have nearly doubled over the past one year, and in the last one month itself they have shot up by nearly 50pc. Farmers in Maharashtra and Karnataka have suffered huge losses because of lack of rainfall during July and August.

The failure on the part of successive governments in India to allow free market policies in agriculture — including forward trading in agricultural commodities — leads to such situations, where either there is a glut in production (resulting in low yields for farmers), or an acute shortage of commodities.

But the government is obsessed with controlling the agriculture trade, and this holds good for both the Congress-led United Progressive Alliance and the BJP-dominated National Democratic Alliance, which is now in power.

Governments usually fail to predict over-production or shortfall in output. When prices start collapsing or soaring, bureaucrats wake up and start imposing curbs on exports and imports. Thus, when there is a glut in production of pulses, prices collapse, the government imposes curbs on imports, and incentivises exports.

But lack of adequate storage facilities for pulses means low prices and wastage. Global markets do not function in such arbitrary fashion and traders plan their purchases months in advance. In India, though the government allows limited forward trading in agricultural commodities, it clamps down in times of crisis, banning all such trades.

This upsets medium- and long-term strategies of market players, distorting the markets and discouraging traders from taking positions. In times of shortage, the government imposes the Essential Commodities Act, accusing traders who have stocked up pulses and other commodities after taking a position of hoarding.

Most traders consequently avoid investing in modern warehouses to stock pulses, as they would be accused of hoarding when there is a crop shortage. Neither do importers buy large quantities when global prices are low, fearing a government crackdown.

The NDA government was aware in May and June about a possible shortfall in the monsoon rains. Last year too was a bad monsoon year, which had affected supplies of pulses, resulting in high prices. The possibility of prices shooting up over the following months was evident, but bureaucrats and their political masters failed to draw up a strategy.

The result: India is being forced to import pulses at higher prices from Myanmar, Australia and Tanzania, even as there is a worldwide shortage. Demand for pulses flares every year in India around October in time for the festive season. But policymakers consistently fail to plan for this surge in demand and appear to be caught unawares.


THE Associated Chambers of Commerce and Industry of India (Assocham) recently warned that India may have to import a record 10m tonnes of pulses to meet the wide gap between demand and production. In crop year 2014-15 (July to June), India imported 4.58m tonnes of pulses and in the previous crop year about 3.17m tonnes.

An Assocham study on pulses said demand for the commodity could surge to 27m tonnes this year, and domestic production could be limited to 17m because of low yields in several producing states. “Import of pulses could be extremely expensive this year as the grower countries are already facing a shortage of supply and have increased their selling rates,” warns the trade body.

India is dependent on Myanmar (for Tur, Urad and Moong), Canada and the US (for yellow peas), Australia, Canada and Myanmar (for Chana/Chickpeas), and on Canada, Australia and the US for lentils. It also imports smaller quantities of pulses from China, Kenya, Tanzania, Mozambique, Malawi and Turkey.

Most Dals, which were selling at below Rs100/kg last year, are today being sold for between Rs180 and Rs200/kg. Traders expect prices to touch a record high of Rs250/kg by next month.

According to Pravin Dongre, chairman, India Pulses and Grains Association, prices soared because of a sharp decline in carryover stocks from last year. Worse, there are no major suppliers internationally and the country has to buy pulses in smaller quantities from different regions.

While India needs to import about 10m tonnes, government agencies have only now started getting deliveries of consignments ranging from a mere 1,000 tonnes to 5,000 tonnes from various countries.

Pulses are mainly grown in the poorer parts of Maharashtra, Karnataka, Andhra Pradesh and Karnataka — where marginal farmers not having access to irrigation, take to pulse production — besides some northern states such as Rajasthan, Madhya Pradesh and Uttar Pradesh.

But the government, thanks to its distorted policies of minimum support price for rice and wheat, has failed to encourage the big farmers of Punjab and Haryana to go for pulses production. Agricultural experts claim that if pulses were to be grown in these two states, it would improve the quality of soil.

In Punjab, for instance, the quality of soil and water is deteriorating rapidly because of rice-wheat crop rotation, where farmers do not substitute these two crops with pulses. Agri experts say that if pulses are taken up by farmers in Punjab in between seasons, it would not only reduce India’s dependence on imports, but also help improve the quality of soil.

Consumption of meat — and proteins — is low in India. Pulses are essential for a nutritious diet, but with prices soaring, they are becoming unaffordable for the middle-class and the poor.

Published in Dawn, Business & Finance weekly, October 12th, 2015

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