it also signed a memorandum of understanding (MOU) with Myanmar for an annual import of 0.1 million tonnes of tur and 0.25 million tonnes of urad (black gram) for five years; and with Malawi for import of 0.1 million tonnes of tur for the same period. Subsequently, it imposed stock limits for wholesalers, importers, millers and retailers on July 2 to prevent hoarding.
This is how the government behaves every time the price of an essential commodity goes up. It is also the reason India is the largest importer of pulses, despite being the largest producer and consumer for the same. While the domestic production of pulses has risen by 122 per cent between 1981 and 2020—from 11.5 million tonnes to 25.57 million tonnes—the imports have risen by 1,622 per cent from 0.13 million tonnes to 2.2 million tonnes (see ‘Perpetual importer’, p33). Though the imports have declined in the past decade, India still does not produce enough to meet domestic demand, causing shortages and occasional surge in prices. One such surge in 2015 resulted in India signing an MOU with Mozambique in 2016 for five years, its first such agreement with a foreign country, to purchase “pigeon peas and other pulses” through “private channels or through Government to Government sales” every year. The quantity promised for purchase started at 0.1 million tonnes in 2016-17 and doubled to 0.2 million tonnes by 202021. On March 19, 2021, days before the price rise, the government extended the MOU for another five years.
The 2015 price surge jolted the government and triggered a political reaction, leading to a gamut of incentives to regulate the market. In a written reply to the Rajya Sabha in July that year, the then Union Minister for Consumer Affairs, Food and Public Distribution Ram Vilas Paswan said the retail price of major pulses has risen from 12.63 per cent to 40.73 per cent over one year due to the decline in production caused by adverse weather conditions. A high-level inter-ministerial meeting on October 14, 2015, chaired by the then Union Minister for Finance Arun Jaitley, decided to create a buffer stock by procurement and import of pulses. Just a year before, in 2014, the government had set up the Price Stabilisation Fund (PSF) under the Department of Agriculture, Cooperation and Farmers’ Welfare to regulate volatility in the prices of essential agricultural commodities. In 2015, it used PSF to import 5,000 tonnes of tur through Metals and Minerals Trading Corporation, a government company. The pulse was released to the states at lower rates.
The government also tried to prevent hoarding by imposing limits on pulses sourced from imports, stock held by exporters, stocks to be used as raw material by licensed food processors and stocks in large departmental retailers. On October 24, 2015, it seized 75,000 tonnes of pulses stocked beyond permissible limits in raids across 13 states. However, 2016-17 saw production of pulses increase to 23.13 million tonnes—a record at the time—making the government impose quantitative restrictions on their import that stayed till May 15 this year, when they were removed to tackle the current surge in prices.
There were two other crucial policy developments last year. On June 5, 2020, the government notified the Essential Commodities (Amendment) Ordinance, 2020. It added a new sub-section (1A) in Section 3 of the Essential Commodities Act, 1955, to stipulate control orders with respect to supply of certain foods. It says such orders may be issued only under “extraordinary circumstances” that “may” include war, famine, extraordinary price rise and natural calamity of grave nature. It also says an order for regulating stock limit of any agricultural produce may be issued only if there is a 50 per cent increase in the retail price of non-perishable agricultural food items over the price prevailing immediately preceding a year or the average retail price in the past five years, whichever is lower. The Ordinance, however, makes the stock limit orders in-applicable to a processor or value chain participant of any agricultural produce if their stock does not exceed the overall ceiling of installed capacity for processing; or, in case of an exporter, it does not exceed overall demand for export. This, say experts, will aid corporates who may prefer to stock up their quota at the time of harvest, when prices are low and, thus, would not need to buy when prices rise. If farmers decide to retain produce for later, prices may not go up or the private sector may not enter the market to purchase.
The second policy change was the Essential Commodities (Amendment) Bill, 2020, to remove commodities like pulses, oilseeds, edible oils, onion and potatoes from the list of essential commodities. This also benefits private players because as long as these items are essential commodities, it is the government’s responsibility to ensure their supply. How successful these steps will be in creating a buffer stock and curbing price surge will only be clear in the years to come.
ALL THAT AILS PULSES
The past three decades have seen stagnation in acreage, production and productivity of pulses across the country due to a bevy of reasons that include availability of more profitable crops
The production of Kharif pulses (tur, urad and moong), which account for about 40 per cent of India’s total pulses, has been worse than that of rabi pulses (chana and masoor). These are the five main pulses produced in the country and covered by minimum support price. According to a NITI Aayog report titled Demand and Supply Projections Towards 2033, released on July 30, 2021, production of Kharif pulses was rising by 8.7 per cent in 1980 but fell to -6.6 per cent by 1990. Production of rabi pulses, too, was increasing at 5.5 per cent and fell to -3.2 per cent in 1990, but it then made a recovery in the next decade and grew at 4.2 per cent after 2000 due to programmes such as the Integrated Scheme of Oilseed, Pulses, Oil Palm and Maize and the National Food Security Mission.
It is important to draw the distinction between rabi and Kharif pulses for two reasons. One, chana is the main rabi pulse, whose production has increased from 5.6 per cent in 2005-06 to 11 per cent in 2020-21, and is the reason behind the overall rise in production of pulses (see ‘Odd one out’, p33). Two, the production of tur, a Kharif crop, considered the country’s primary pulse because of its consumption in meals as dal everyday in most northern states, has only grown from 2.7 per cent to 4.8 per cent in the same period. There are no official estimates, but experts say that tur’s consumption in meals as dal is much more that of chana, whose rise is on account of its use in packaged foods.
The government’s flip-flop on stockholding limits does not help pulses’ pricing issues SUKHPAL SINGH
THE UNION government’s decision on July 2, 2021, to impose stock limits on pulses till October 31 has once again fuelled the long-held perception that the country’s food policies are not even consistent, let alone being relevant.
On June 5, 2020, the Union government issued the Essential Commodities (Amendment) (ECA) Ordinance, 2020—later legislated into an Act—which said a stock limit would be imposed only if there was a 100 per cent rise in retail prices of perishable food items in the last one year or five years. The rationale for this amendment was that India was food surplus in most agricultural commodities, and farmers were not able to realise fair prices due to lack of investment in warehousing and processing capacities because of regulatory mechanisms prescribed under the ECA, 1955. The lack of ‘ease of doing business’ was also cited for the poor investment in storage and processing infrastructure by the Economic Survey 2015-16 and the Arvind Subramaniam Committee (ASC) Report on Pulses (2016).
Farmer unions, which are demanding repeal of the ECA, 2020, along with two new farm Acts, now argue that the recent stockholding limits contradict the Act. The price of chana dal at the end of June 2021 was barely higher than the one-year average. The price of tur dal was only 4.6 per cent higher than the average over the last year, and 13 per cent higher than that of the last five years. Importers claim lower stocking limits would make imports costlier as container costs and prices would go up.
In India, pulses are under minimum support price (MSP), but farmer awareness is poor as procurement is not effective. Combined with the high variation in procurement price of pulses, this means that at the farmer level, the differences in social and private returns from pulses are large, like 101 per cent in chana, and 95 per cent in urad, due to no value being placed on the positive externalities of pulse crops like nitrogen fixation ability and lower water and chemical consumption. In this context, a focus on domestic production by small farmers in dry regions, with effective MSP-based procurement, would be a win-win for all.
(Sukhpal Singh is a professor at the Indian Institute of Management, Ahmedabad)
The stagnation of Kharif pulses is also borne by acreage. The NITIA ayog report says that land under Kharif pulses was increasing at an 8 per cent rate in 1980, but by 1990, it was declining by -8 per cent. Tur’s acreage has only risen from 19 million hectares (ha) in 1950-51 to 29 million ha in 2019-20 (see ‘Stagnant forever’, p35). What is the reason behind this stagnation of pulses in general and tur in particular?
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