Farmers hit hard as import of pulses surge, despite record harvest
Why is India resorting to imports of pulses at higher prices while farmers are forced to sell at less than MSPs?
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New Delhi: While farmers in India are forced to sell pulses below government announced minimum support prices (MSPs) following a record harvest, imports in the past three months surged nearly 30%.
During October to December, 2016, India imported nearly 2.45 million tonnes of pulses, up from 1.9 million tonnes imported in the same period in the previous year, shows data from the Indian Pulses and Grains Association (IPGA), an industry body.
The data shows that imports of arhar (pigeon peas) rose threefold during this period, from 83,325 tonnes in 2015 to 2,74,075 in 2016.
Interestingly, the rise in imports came despite a 74% rise in domestic production of arhar—estimated at 4.29 million tonnes in 2016-17 compared to 2.46 million tonnes the year before—as per the first advance estimates released by the agriculture ministry last September.
The record production of arhar has led to a dip in domestic wholesale prices and farmers across major growing states are selling arhar between Rs4,300 to Rs4,500 per quintal, substantially lower than the government announced MSPs of Rs5,050 per quintal. And strangely enough, the imports were costlier— between Rs6,000 and Rs9,000 per quintal.
So why is India resorting to imports at higher prices while farmers are forced to sell at less than MSP?
“Most of the imports were contracted in July at higher prices when it was not known that domestic production will be at a record high. So the government also imported at Rs9,000 per quintal as did importers who are now bearing huge losses,” said Pravin Dongre, chairman of IPGA.
Dongre added that domestic prices dipped below MSP as the government imposed stock limits restricting private traders from mopping up the abundant supplies at home and lift prices. “A trader is not allowed to hold more than 200 tonnes while an importer is free to import without any limits. For farmers the government should actually open up exports and do away with stock limits (as recommended by the committee headed by chief economic advisor Arvind Subramanian in September),” he said.
The Centre has set a target of creating a 2 million tonnes buffer stock of pulses but till 23 December it procured just 6.95 lakh tonnes through domestic procurement and imports, a food ministry statement said last month.
“It is paradoxical to see farmers selling arhar at prices significantly below MSP while India is importing in large quantities. The current policy environment smacks of being anti-farmer and pro-consumer,” said Ashok Gulati, agriculture chair professor at the Indian Council for Research on International Economic Relations, Delhi.
“We should actually provide farmers with a level playing field by opening up exports, abolishing stocking limits for private trade, introducing futures trading in pulses and impose at least 10% import duty, if not 15-20%,” Gulati added.
Besides arhar, the latest import figures also point to an interesting trend. Import of yellow peas—the cheapest pulse variety available domestically—surged 74%, from 0.83 million tonnes in 2015 (October- December) to 1.45 million tonnes in 2016.
This indicate that consumers are switching over to yellow peas (matar) as it is more affordable than say, arhar, but equally nutritious (matar is selling at Rs 50 per kg in retail stores compared to Rs120 per kg for arhar).
According to a note prepared by the IPGA, the government overestimated production of chickpeas (chana) in 2015-16, leading to a rise in retail prices which forced consumers to shift to yellow peas.
In 2016-17, India is likely to import nearly 3 million tonnes of yellow peas, mostly from countries like Canada, France and Australia.