New Delhi: In an effort to control spikes in retail prices of pulses and address recurring gaps between demand and supply, the centre on Monday decided to more than double the buffer stock limit from 800,000 tonnes to 2 million tonnes—or over a 10th of India’s domestic production in the past year.
A large buffer stock would allow the government to intervene through open market sales whenever prices shoot up, food minister Ram Vilas Paswan said at a briefing on the decision approved by the Cabinet Committee on Economic Affairs.
Paswan said the buffer stock would cost the centre around Rs18,500 crore, adding that the finance ministry had agreed to arrange the funds.
Consecutive years of droughts resulted in a drop in domestic production of pulses to 16.5 million tonnes in 2015-16, from a high of 19.25 million tonnes in 2013-14, leading to a surge in imports at a record 5.8 million tonnes during the year.
“Every year, domestic demand for pulses goes up by nearly 1 million tonnes and the centre took several steps to remedy the situation,” Paswan said. “(Following a good monsoon) this year, farmers have planted 30% more area under pulses and prices are likely to come down soon.”
He said the stock limits imposed on traders are here to stay and that the government will actively procure pulses from farmers whenever prices dip below support prices.
“We are aware of the gap between retail and wholesale prices and the centre will employ an independent agency to monitor prices at the district level,” Paswan said.
A statement issued by the food ministry said that the drop in production due to drought had given middlemen an opportunity to speculate.
Over the past year, different pulse varieties retailed for between Rs100 and Rs200 per kg, making the daily staple unaffordable for many.
According to the food ministry, the buffer stock of 2 million tonnes will comprise domestic procurement of 1 million tonnes from farmers by different central agencies. The rest will be arranged via government-to-government contracts with other countries and spot purchases from the global market.
“The decision to raise buffer stocks to at least 10% of domestic consumption will help in stabilizing prices and was long awaited,” said Ashok Gulati, agriculture chair professor at the International Council for Research in International Economic Relations, New Delhi.
“However, the centre has to learn the tricks of the trade, especially when to procure and release stocks,” he said.
The statement from the food ministry said Prime Minister Narendra Modi personally intervened and took up the issue of price rise on priority. Enhancing the buffer stock was a key recommendation of a high-level committee set up under the chairmanship of the finance minister.
Earlier, the centre decided to raise support prices for pulses and set up pulse production hubs across the country to boost output.
Farmers see pulses as a risky crop, grown under rain-fed conditions, in the most drought-prone parts of the country. Only 16% of the area for cultivation of pulses in India has access to irrigation.