How to address Pulses Crisis in India?

How to address Pulses Crisis in India?

“Pulses Diplomacy and Pulses Management” Action Plan for Policy Makers

By

Vijay Sardana

Domestic demand is out pacing the domestic supply base. Demand is about 28 million tons and supply is about 18 million tons. Few economist assume due to poverty people can't afford pulses so the actual demand is about 23 to 24 million tons. I feel poverty should not be an excuse for justifying demand and supply gap. poor needs better nutrition because of unhygienic and difficult living conditions. 

There are few pulses which are very popular and few are less popular because of recipes and traditional uses. There are many other field crops which are used as pulse and also in may other applications. We should keep these in mind when we are planning for pulses. 

There are many reasons for inflation and demand -supply gap in pulse. This can be discussed in detail separately. These issues should be address keeping 3 to 5 years’ time horizon in mind.

On the other hand, World also knows India is in short supply and we should be careful about pulses prices. It is true in free economy we should leave it to market forces, but when it comes to food security of majority, no sensible policy maker should not leave it to market forces alone. Please note champions of free markets also monitor agriculture and food supplies very closely. 

If free market is the only way forward, then why there is so much subsidy, incentives and tariff lines in agriculture sector globally mainly in developed world so called champions of free market economy. Food security of nation cannot be at the mercy of market forces. Corporate world is neither competent nor capable of feeding 1.27 billion people every day with wide diversity of purchasing power and tastes & preferences. Let us not be in the trap of double standards of free markets for the sake of national food security. Government has to do what is right and in the interests of majority. 

Request to government of India is please take appropriate actions and policy decisions whatever is in the national interest of India to feed 1.27 billion people every day (not political interest of ruling party).

Pulses crisis in India and excessive inflation in Pulses:

Important: Please also note that people involved in unfair trade practices do it for extra financial gains and very often these people are also violating tax laws as well. They know how to manage money in multiple heads and under many options. 

Check the money trail also source of funding, under reporting of stock and under-invoicing and over-invoicing to fix the problems. Many such large players use small traders in mandies / market yards to buy the materials and supply the funds to them for stocking  or hoarding. They themselves are not in business of pulses trade or processing, they are just financiers. Inflation is the only way by which they can make money.  Check their activities.

We have to explore following options in combination:

1. Close monitoring and surveillance of pulses purchase, stocking and movement in local economy

2.   Use of Price Stabilization Fund should be in calibrated manner

3.   Promote alternate sources of protein like soy nuggets for vegetarians and eggs and fish for non-vegetarians by discussing “Role of Protein in Diets” in in place of product specific promotional activities, considering sensitivities towards non-vegetarian sources of protein.

4.   Differential Reporting Policy for Pulses Millers and Pulses Traders

5.   “Pulses Diplomacy” to ensure affordable sourcing on long term basis

6.   Incentivize Pulses seed research and extension service to private sector

7.   Review Pulses Minimum Support Price based on profitability per acre basis w.r.t other competing crops in the same season in identified areas.

A.  Short term measures:

1.   Close monitoring and surveillance of pulses purchase, stocking, imports and movement in local economy

·      Central government should issue directive to all APMC markets and state government to report arrival of pulses and the price at which these are traded in the respective mandies. This will help us in monitoring supply situation.

·     This will help us who are the major buyers and where they are located and where the stocking is going on.

·    In case of abnormal behavior one can also ask the sources of funding, because without funding procurement is not possible. The source of funding will tell us the motive behind the stocking.

·      Banks should be advised to inform the authorities about the credit limits issues to commodity traders in pulses production belts.

·        Tracking of price movement will tell us what should be the cost of pulses in retail market. If required under Essential Commodity Act, MRP for pulses can be imposed. Once we have database, traders and industry will not be in the position to protest. In fact advance warning can be communicated to trade that in prices will cross this limit, government will activate the “Safe Guard Measures” in the interest of consumers.

2.   Use of Price Stabilization Fund

·      Use this fund to build buffer of narrow commodities mainly Tur, Urad, and Kabuli Channa.

·    Use this fund to promote protein sources so that demand for  alternate crops may emergence and dependency on pulse may go down

3.   Differentiate with Pulses Processors and Pulses Traders

·    Most of the pulses have to be processed / cleaned before it comes to market.

·       We should plan an approach to encourage pulse millers, registered with FSSAI, to stock more and stock limit should be relaxed for them so that supply should not hurt. They will prefer to run the units and sell goods because they will incur huge fixed cost and quality risk, if they stock for more than required duration.

·        Traders with no processing facilities should be asked to report the stock position and sources of pulses and funds. This will check the excessive stocking and they will be force to liquidate the stocks at regular interval.

·     Credit limits from banks for the large traders having tendency to stock material for hoarding should be restricted.

·     This can be reviews on weekly basis and suitable policy interventions can be done to discipline spot markets trade.

4.   Traders may stock outside India, beyond the jurisdiction of Indian government

·        If exporter to India is selling at high prices, we have little control on them, but we can monitor their trading associates and partners in India.

·        Government should keep trade of imported consignments – whether it is coming to millers or to the traders – quality and invoice value.

·     The import price and selling price by these traders can tell us the role they are playing in the pulse trade.

·        The message from the enforcement agencies that their stock movements and prices movements are under surveillance will bring some sanctity. Use of tax authorities to estimate the gains from taxes (difference between import price and imported quantity and selling price) and taxes paid by them will send strong message to the hoarders.

·    This will also check cash transfer between buyers and sellers. In this case, farmers are not involved so any transaction between exporters, importers and local trade should be traceable, unless there is cash transfers. This can be declared illegal under money laundering act and other tax laws.

·      Purpose is to convey a message that as long as things are reasonable and under control government will not interfere in normal business operations, but if people try to distort the market, government has all options to fix the problem which can be painful for some.

B. Medium Term Policy Interventions

5.  "Pulses diplomacy” – A powerful and sustainable political and diplomatic tool for food security:

·      India is in short supply of pulses and oil seeds. The biggest limitation in enhancing the product is availability of natural resource i.e. suitable land, water and genetics (seeds).

·    Many countries in the world have natural resource i.e. suitable land, water. India agriculture research establishments can offer research support for developments of genetics i.e. seeds.

·        Countries of East Africa, East Asia, Latin America can be explored based on agro-climatic conditions for pulse production.

·        A suitable arrangement or formula can be worked out at diplomatic level based on technical parameters and domestic support prices to Indian farmers. This will help in protecting interest of Indian farmers and at the same time will provide alternate crops to local farmers. If this makes commercial sense to them they will grow and at diplomatic level Government of India can enter into some barter trade agreement to source pulse in return of other products and services, which are mutually acceptable. This will help both - the governments and their farmers.

·        This may be country specific approach, considering the ground reality.  

·     East Africa can be starting point because of geographic proximity to India.

·        New production belts can be identified based on cost of production.

C. Medium to Long term Intervention:

6. Encourage private sector participation in pulses research:

·        Most of the private seed companies are not willing to spend resources on seed research in India. The reason is there is hybrid in pulses as of today. In my view, Government of India should develop a system by which any company providing seed with having average productivity more than two (02) tons per hectare will be given tax exemption on pulses research and seed sales.

·     This foregone revenue will be fraction of money saved in imported pulses. This will also create rural employment, improve soil health, save water, develop local pulses trade and industry and reduce food insecurity, improve human nutrition and minimize subsidy on fertilizer and water. Pulses are climate smart crops.

·        The tax incentive can be give once the research is over and products are launched. All the research spending can be audits and used to give tax incentives. There are hardly 20 companies in seed research, so this is not difficult to monitor and manage.

·  Seeds developed by public sector research should be promoted on website for other small seed companies to adopt and promote among farmers.

·        MSP for the pulses should be based on profitability per acre not per kg. The return from the land should than be back calculated for MSP per kg. This is the only way one can create interest among farmers. This will also help in inducing better technologies for seed production.

These are few suggestions which government may consider to revive pulses economy in India.