For several decades, production of pulses in India has fallen substantially short of consumption. The persistent deficit has led to intermittent bouts of spike in their prices as imports [needed to plug it] have often come after lag and failed to reach consumption points in time – courtesy, handling, storage and transportation bottlenecks.
The import of pulses in large quantity also resulted in huge outgo of foreign exchange exacerbating balance of payment problems especially during times when the macro-economic fundamentals were weak [for instance, during early 90s and 2012-13/2013-14]. This also affected the ability of the government to remain glued to the path of fiscal consolidation.
Pulses are an important source of nutrition especially for vegetarians and a critical component of the diet of the poor. This nutrition-poor link juxtaposed with hike in price has also been exploited by opposition parties to take pot shots and tarnish the image of the ruling establishment merely to secure political mileage [as seen during assembly elections in Bihar and Delhi (2015)].
To deal with the situation, Modi – government increased the minimum support price [MSP] of pulses by over 15% [for instance, Lentil/Masur from Rs 34,000 per ton to Rs 39,500 per ton] and promised to buy farmers entire produce at MSP via Food Corporation of India [FCI] and other state agencies. It also decided to build a buffer stock of 2 million tons. These measures were intended to incentivize farmers take up sowing of pulses in a big way so that domestic production increases to bridge the demand-supply gap. The impact was salutary.
During Rabi season [October 2016–March 2017], cultivated area under pulses increased to 16 million hectares from 14 million hectares during last Rabi [October 2015–March 2016]. Correspondingly, production during 2016-17 is estimated to be 22 million tons – an increase of 25% over last year. This together with close to 3 million ton import has led to excess availability and resultant drop in prices.
While, consumers have benefited significantly due to 40-50% decline in retail price from their peak level Rs 125 – 175 per kg prevailing in 2015, this has brought miseries to farmers who face their realization plummeting to level below MSP. For instance, the price of Tur [pigeon pea] has fallen to Rs 35,000-47,000 per tonne in Madhya Pradesh, Karnataka and Maharashtra against MSP of Rs 50,500 per ton. Moong [gram] is selling in the range of Rs 45,000-50,000 per tonne as against MSP of Rs 52,250 per ton.
This is because in blatant violation of the commitment given by Modi – dispensation, state agencies have not come forward in requisite measure to buy [despite the prime minister announcing extension of procurement by a week]. If, the trend continues, farmers will be disinclined to take sowing of pulses in next season with potential for steep decline in production – back to square one. This will tantamount to grounding the plane even before it takes off.
Team Modi vowed to build farmers capacity but ended up incapacitating them. It promised them a remunerative price/MSP but failed to take steps to ensure that they actually get it. They were assured that all of their produce would be bought at MSP, but procurement agencies did not measure up to the task.
Actually, the problem is much deeper. This has to do with a cozy nexus between politicians and grain traders [in many cases, the former also happen to be deeply entrenched in this business] that has existed and flourished for generations. A grain trader has a fundamental interest in ensuring that he minimizes his payout to farmer for the grains he buys from him/her. He can succeed in this game plan if farmer is left high and dry by state agencies.
So, he collaborates with the politicians in the ruling establishment to ensure that state procurement agencies remain weak and de-motivated. The two conspirators also make sure that the infrastructure for handling, storage and distribution remains undeveloped/under-developed so that even if a policy for effective and timely procurement is laid down, it cannot be executed on the ground.
But, for this under-the-table plot to deny farmers their legitimate dues from selling his/her agriculture produce, how can one explicate procurement of a measly 5% of wheat produced in Uttar Pradesh [UP] by state agencies. It is only now with Yogi taking charge putting farmers welfare first that the state government is gearing up to increase purchase from current 800,000 tons to 8 million tons – 10 times.
Pertinently, it is this all pervasive conspiracy that is coming in the way of implementing long-pending reforms in agriculture. For instance, dismantling of APMC [agriculture produce market committee] act or at the least amendment to exclude major items from its purview and setting up of private marketing yards is crucial for giving more options to farmers to sell their crop. Yet, several states have not yet carried out these amendments. For the same reason, the progress in regard to e-NAM [electronic-national agriculture market] is tardy.
The states have also not made necessary investment in infrastructure for procurement, handling, storage and distribution nor formulated policies that would induce private sector to undertake the required investment. The policy to allow FDI [foreign direct investment] in retail including food which could have made a big contribution in this regard has been hanging in balance for a while.
In budget for 2016-17, the finance minister had announced 100% foreign FDI in food retail. This was subject to retailer selling only food procured from farmers in India and processed locally. However, guidelines in this regard are yet to be notified. Meanwhile, the food processing minister wants to impose caveats such as investment in agri-infrastructure, farm machinery etc. This will only deter foreign investors.
In this backdrop, it is no wonder that the policy boost [by way of hike in MSP and creating a buffer stock] announced by prime minister with so much of pomp and show is failing to deliver. India will continue to be trapped in the vortex of deficit in pulses and intermittent spike in their prices unless Modi makes a frontal assault on the unholy nexus between politicians and grain traders.