The effect of consecutive droughts and crop failure in villages is finally being felt in cities. Last month, food price inflation breached the 7% mark, its highest in over a year. The steepest price rise was in pulses, and vegetables like tomato and potato.
Experts say the rise in the price of tomatoes is a seasonal phenomenon, which may ease in a few weeks, but the recurring problem of spikes in the prices of pulses – a dietary staple that has, for long, been a cheap source of protein – will persist.
Drought, and irrigation issues.
The immediate reason for the spike in the prices of pulses is drought, which has affected more than a third of the country's area. Pulses grown in dry regions are particularly vulnerable to the vagaries of weather as only 16% of the area on which pulses are grown is irrigated, much lower than the area with assured irrigation for wheat (93%) and paddy (59%).
Two bad monsoons interspersed with untimely hail early last year meant that after achieving peak production of 19.8 million tonnes of pulses in 2013-’14, production fell below normal to 17.3 million tonnes in 2015-’16, much lower than the consumption requirement of around 23 million tonnes – a shortage of 6 million tonnes.
The result of this shortage was that last year, customers paid Rs 160 a kg for arhar or tur dal, Rs 125 a kg for urad and Rs 110 a kg for moong. This year, in some states, urad dal is as high as Rs 196 a kg.
Combined with this fluctuation in production is a situation peculiar to pulses: there is a limit to the amount of pulses India can import. Harish Damodaran, agriculture editor of The Indian Express, has estimated that the annual global trade in pulses is 15 million tonnes, lower than India's annual demand of 23 million tonnes. Most countries that derive their protein chiefly from eggs and meat are unlikely to switch to growing more pulses.
Further, the option for imports are limited even from the few countries that grow pulses such as Myanmar, Mozambique and Thailand because of the variation in taste. With arhar grown in India considered to be of a far superior quality, domestic consumers are unlikely to switch to imported pulses. Thus, the solution to this recurring price rise has to be home-grown.
How has the government responded?
Union Finance Minister Arun Jaitley, Food Minister Ram Vilas Paswan and Commerce Minister Nirmala Sitharaman attended a high-profile meeting last week to discuss ways to control the rise in the price of food, especially pulses.
Last week, a team of officials left for Mozambique, in Africa, and Myanmar to discuss imports of arhar, moong and urad, as well as to discuss contract or lease farming to grow pulses in Malawi in Africa in the long term.
The government also imposed stock holding limits on traders to prevent hoarding. To check speculation, it has banned futures trading in chana, the only pulse in which commodity trading was allowed.
The ministers also announced that the government will increase the buffer stock of pulses from about 50,000 tonnes to 1,00,000 tonnes, and then gradually to 8,00,000 tonnes in the next few years.
This goes hand-in-hand with the increase in minimum support price (the rate at which the government buys grain or pulses from farmers) for pulses.
Economist Dr Suresh Pal, a member of the commission for agricultural costs and prices – which recommends support prices for crops based on demand and supply, and domestic and international prices – said that the government had announced sharper increases in the minimum support prices for pulses as compared to other staples such as paddy.
“For this summer’s crop, we recommended a MSP of Rs 4,625 per quintal for arhar dal,” said Pal. “The cabinet committee on economic affairs added a Rs 425 bonus to make it Rs 5,050 per quintal, which is 9.2% higher than last year.”
Comparatively, the increase in the minimum support price for paddy, which is Rs 1,510 per quintal, was around 4% higher than last year’s.
Dr Pal said that this announcement would encourage farmers to devote more land and other resources to the cultivation of pulses, thereby helping increase domestic production.
But agriculture experts say these measures are not sufficient and the government needed to take bolder steps to boost domestic production and increase the amount of land on which pulses are cultivated.
Importers and traders also worry that some of the government’s steps announced recently may even affect the terms of trade to their disadvantage.
Agriculture economists, Dr Ashok Gulati and Shweta Saini, have pointed out that when the government imposes stocking limits as a price control measure, even legitimate stockists are treated as hoarders. Thus, though stocking limits provide some immediate relief as more pulses reach the market, in the long term, this discourages private investment from creating storage facilities like warehouses.
The limits of checking the prices of pulses through imports have already been discussed above. The government's efforts to increase imports to tide over the immediate crisis has importers worried about the effect of the government's floating tenders, which, they fear, will make prices more rigid.
“When the government announces that it will buy more, it leads to hoarding by traders in countries like Myanmar and Mozambique too, distorting the prices,” said SP Goenka, spokesperson, India Pulses and Grains Association. “In case of a sharp fluctuation or rise, the consumption goes down for some period and that hurts importers like us as well.”
Goenka said that the government should leave trade to importers, and focus on boosting domestic production of pulses instead. This, he said, would lead to a stable price regime in pulses, which will benefit traders and importers in the long run.
While the government's aim to increase the buffer stock of pulses to 1 lakh tonnes is a step in boosting production, the increased quantity is still a fraction of the 20 lakh to 30 lakh tonnes economists like Gulati recommend as a buffer.
The decision to create a larger buffer stock of pulses will also require a simultaneous increase in the government’s capacity to store stocks, which food ministry officials say the Food Corporation of India and the National Agricultural Cooperative Marketing Federation of India are not equipped for.
Finally, it may not be enough to increase the minimum support price of pulses by 9%-10%. The government may have to give stronger incentives to farmers in irrigated areas such as Punjab, Haryana and western Maharashtra so that they switch to growing pulses. These farmers prefer to stick to wheat and paddy, which have higher productivity per hectare, and a more assured price as compared to pulses.
“Though the MSP of pulses is higher than before, it works out to Rs 50 a kilo for arhar dal, much lower than even average market prices of around Rs 90 a kilo or import prices of Rs 70 a kilo, so there is scope to increase it more,” said Goenka.
Scientists at the Indian Agriculture Research Institute said the minimum support prices should also be increased to reflect that pulses are more prone to risks. “Pulses like arhar and chick-pea are very vulnerable to pests like the pod borer, and also attract animals like the neelgai,” said Dr AK Singh, a scientist. “Yet, pulses have advantages like they consume less water and less fertilisers.”
A concerted, long-term effort for self-sufficiency in pulses will require the government to consider all this in its policy design.