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Business News/ Opinion / The pulses crisis: why reinvent the wheel?
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The pulses crisis: why reinvent the wheel?

The shortfall in pulse production is expected to be around 2 million tonnes this year

India’s average annual import of pulses during 2010-11 and 2014-15 was 3.56 million tonnes. Photo: Mint Premium
India’s average annual import of pulses during 2010-11 and 2014-15 was 3.56 million tonnes. Photo: Mint

Under siege over sky-rocketing pulse prices, especially when the crucial Bihar elections are underway, the Centre initially blamed the state governments for the situation at hand for failing to crack down on hoarders. According to news reports, more than 80,000 tonnes of pulses have been recovered in raids across states in the last week or so. Politics apart, the message is clear. It is time to put on the inspector raj cloak once again.

Compare this with the overall policy thrust on removal of all barriers to free trade within the country, including in farm produce. An October 2014 finance ministry working paper (never mind the usual disclaimer) called for amending or repealing of laws like Agriculture Produce and Marketing Act and Essential Commodities Act under which such raids can be undertaken. Call it selective amnesia or desperation to be seen as doing something, such doublespeak is the preferred tactics of governments. Talk reforms when things are nice, turn hawkish when they are not.

Even this hypocrisy cannot solve the problem. The shortfall in pulse production is expected to be around 2 million tonnes this year. India’s average annual import of pulses during 2010-11 and 2014-15 was 3.56 million tonnes. That is roughly a quarter of total pulse exports globally. Any effort to fulfil the production deficit through imports is both difficult and inflationary. To believe that conducting raids would help us meet the shortfall when production has taken such a hit is like fishing in a bucket instead of the sea.

A vicious circle is responsible for the problems of price stability and low production of pulses. India is a large importer of pulses. In case of an abnormal shortage in production, both domestic and international prices are bound to go up: this is the first part of the problem. Recent data from the Commission on Agricultural Costs and Prices (CACP) shows that domestic prices of pulses are often higher than international prices.

Given our import dependency, there is zero import duty on pulses. Cheaper imports leading to price crash might spell doomsday for the domestic farmer. Volatility of pulse prices—both domestic and international move in tandem—is an important reason for the crop receiving a step-motherly treatment from farmers. It is largely grown in rain-fed areas, while procurement-secure crops occupy the irrigated areas: this is the second part of the problem.

There is reason to believe that neither vigilante raids nor prescriptions of greater liberalization in domestic markets, trade policy and commodities and futures markets would solve these structural problems. The most pressing concern for the Indian farmer, big and small alike, is whether or not the crop would realize remunerative prices. A large majority of them have to sell their crops immediately—when prices are lowest due to abundant supply—after harvest to pay off loans incurred during cultivation. No amount of liberalization can address this problem, given the fundamental asymmetry in the pricing power the farmer and trader can exercise.

Uncertainty of prices is a major deterrent to increasing cultivation, in absolute terms as well as its irrigated component, for any crop.

This is not to undermine the importance of developing high-yielding varieties (HYV) of pulses, given the abysmal performance in yields.

Overcoming import-dependency—one part of the structural problem—requires a big push in India’s pulse economy. A mix of price support and technological advance did the job for India’s foodgrain economy during the green revolution. Farmers only took up the enhanced risk cultivating HYV crops when they were assured of guaranteed prices. A comparison of acreage and yield trends for rice, wheat and pulses in the two charts below clearly shows the difference a procurement-technology mix can make. Any effort to ignore these stylized facts and look for other methods amounts to wasting time in reinventing the wheel.

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Published: 29 Oct 2015, 01:33 PM IST
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