Why Misleading Policies and Politics over Pulses Crisis?

Why Misleading Policies & Politics over Pulses Crisis?

Are political parties ignorant of ground reality or they deliberately misleading the nation?

By:

Vijay Sardana

Updates on twitter: @vijaysardana

On 29^th July 2016, main opposition party of India issued a press statement on pulses crisis and also raised issues in parliament on pulses inflation and supply crisis and how country is looted by traders with the support of ruling party. There were very strong words used. In my reply, I am also trying to use the words which should convey the same intensity. By no means I want to undermine political establishments and political people, they play important role in policy making, but when some political representatives from opposition camps, are trying to mislead the public at large for political gains, by defaming whole pulses trade, it is not appreciated.

Please read the Press note mentioned above, this is a classic document to understand how little background work political parties do in the interest of citizens of India and how much time and resources they invest in misleading the nation.  Author is tracking developments of pulses economy globally, and this is an attempt to analyze the statements issued by main political party based on factual situation of pulses.

Issue no 1: Dal (pulses) Inflation is a man-made crisis...

Yes, it is true because there is no Food Security Plan in India till date.

Press release of main opposition party which ruled India for more than 60 years out of 70 years, since independence says, dal is a man-made crisis because demand for dal is increasing and no attempt was made in the country to improve the productivity of dal. Every year about 15 million people are the population register, but supply per capita of dal is shrinking. According to my calculations, dal shortage will continue for at least next 10 years because of the demand supply gap about 25 to 30%. The biggest question is why there is no Food Security Plan in India.

The real issue is: The main opposition should answer, in last 60 years of their rule since independence, why there is no National Food Security Plan. It is clearly a man-made crisis and all political parties should answer why there is no Food Security Plan in India. 

Will they force national and state governments to come-up with National Food Security Plan? Still it is not an election agenda and no one is keen to have this because this will be the toughest political agenda of all times.

Issue no 2: Dal (pulses) Crisis’ is a ‘Man-made Scam’ of over Rs.2,50,000 crores (about USD 37 billion)

Nature or God never create scams.  According to various estimates, the total pulses production in India is about 17 million tons and demand is about 23 million tons. There is gap of about 6 million tons.

Majority of pulses in India is produced in the states which were till recently and are ruled by opposition parties. All agriculture activities and commodities are controlled by state governments, because agriculture is a state subject. Are we saying that in man-made crisis of Rs. 250,000 crores (about USD 37 billion), state governments are party to this crime? If scam is of Rs. 250,000 crores, it comes to about Rs. 147 per kg of locally produced pulses. It will be useful, if all state governments including ruled by opposition also tell us how much mandi-tax i.e. transaction taxes state governments have collected on pulse from market yard in last 10 years. This will tell us whether pulses production has gone up or gone down.

This is not clarified in press note.

The real Issue is: There is no attempt by any state government irrespective of political parties to improve the productivity of pulses. They may claim they are doing, but the ground reality speaks the facts. Pulses are treated as orphan crops that is why productivity of pulse is one of the lowest among all crops in India and also the productivity is stagnant from last 20 years and per capita availability of pulses is going down. When there is increase in personal income, people will prefer to improve the quality of diet and demand for pulses goes up. This leads to inflationary pressure.

To understand the situation better, state governments should make their accounts public to understand how much mandi-tax they have collected from pulses. This will tell us, at what price pulses were sold in state market yards and who much was paid to pulses. Why states are hiding this fact? If pulses producing states are not willing to share the data, this means they do not have any record of pulses production and all these production figures are fictitious and actual supply is much lower than what is projected by state governments. This will clarify that major cause of pulses inflation is outcome of the shortage of pulses in domestic supplies.

Issue no 3: Allegation is that Pulses are purchased from farmers at Minimum Support Price (MSP) but sold to consumers at high retail price.

It seems the political parties are either not aware of the mandi trading system or trying to act ignorant about ground realities.

In ideal situation framers must sell higher than MSP, because MSP is the minimum price which he should get for his crop. I challenge anyone who says pulses are traded and sold in mandies/market yards by farmers at MSP, please book 100,000 tons or million tons order for me right now and I will sell at market price. In fact, I will bid for all MMTC tenders and get all orders and will also offer some to political party who will help me in arranging pulses at MSP. I will be very happy to the political parties for making me billionaire in shortages possible time.

Or, they should help MMTC in procuring pulses from the states ruled by them at MSP price, this will be the biggest service to the nation by any political party.

Issue no 4: Pulses have huge cost escalation between MSP and MRP.

Once again, it seems that people advising the political parties are either ignorant of the facts or misleading their political masters. I request, political party spokespersons, let us enter into agreement that I will provide you pulses and you will deliver me the pulses in the manner it is sold in the market by charging the services charges and processing charges which they are claiming in their press note.

Many political leaders are in pulse business as well. It will be useful if political spokespersons visit their factories and understand how pulses are processed, packed and handled. What is the yield of the pulses after milling and what is the cost of processing including cost of capital, salaries and wages?

Unfortunately, all the data provided in the press release of the political clearly indicates, that they have no clue about what they are talking and their data is also fictitious. I am using these words because they are trying to brush everyone as criminals and only this political party is the honest group working in national interest.

Issue no 5: Stock limit in Pulses trade

Whenever there is price rise, the first allegation comes up is hoarding is going on and there must be stock limit. This is one of the most illogical argument one can have while trying to control food inflation. When prices of green vegetable goes up, who is hoarding green vegetables? When price of milk goes up, who is hoarding milk? When fodder prices go up, who is hoarding fodder?

On one hand, we debate in parliament that there are no storage places in India that is why there is massive food wastage in India. Government of India offers financial support from taxes money to create warehouses on the other hand we claim all the material like pulse are in godowns and hoarding is going on.

Last year there were more than 10,000 raids. What was the outcome? It has made the situation more complicated for India. Importers felt there is no need to buy pulse in bulk and they stopped entering into large contracts and country suffered supply problem, this further aggravated the inflation problem. Now, world over all traders knows, pulse is politically sensitive topic for India. They have changed their game plans and India is the only loser because out of 15 million tons of pulse traded world-wide, India buy only 30% of the world trade. There are many markets around the world and more profitable. So, why deal with India when they can make more money outside India. Why they should waste their time in India and address illogical arguments raised by political system in India. The outcome is Indian consumers are suffering.

It is high time political parties must understand that political statements without logic make situation more complex because normal trade practices get distortion and illogical decisions cannot change demand-supply situation.

What is the future of Pulses in India?

Demand for pulse in India is about 26 to 28 million tons and this is growing at the rate of 1.5 million tons annually due to growing population and growing per capita income.

Last year, India produced about 17 million tons of pulse, this year due to good monsoon, it is estimated that pulse production will be about 20 million tons. Who will supply the remaining 6 to 8 million tons?

It is high time we must accept the fact, like edible oil India cannot produce pulse to meet her demand. International market will fill the gap. According to my calculation, even if the best of technologies are provided and required infrastructure is created, it will take at least 10 years to fill the demand-supply gap in pulses, provided state governments cooperate and do not behave funny due to political compulsions. Till 2025, India will remain dependent on imported supplies for pulse and edible oils. This will cost India about US$40 to 50 billion annually.

Caution:

The way we are trying to manage the pulses crisis, it will hurt farmers the most because by keeping traders out of domestic market, traders will be forced to buy from world market and offer to consumers. With no demand from local trade, farmers will not be able to sell even at MSP and governments, both central as well as state governments, are not competent to even procure the pulses based on quality. It is like handling cash with all security and honesty. Government  departments are not competent to check quality, mill it and offer to consumers. This is a specialised skill, and government departments are not trained to manage at the scale which is required. They will have to depend upon private trade. So, why to create mistrust now. It will be penny wise, pound foolish approach. Let us wait for the harvesting time and see what happens in mandies.

My humble request to all political parties is please spend time in parliament and draft a national food security strategy and its execution plan in place of drafting press notes which are factually incorrect and misleading.

Agriculture is state subject, why state governments are sleeping on this vital issue?

If anyone has any confusion, author will be more than happy to share all calculations and supporting information on all the points mentioned in this note.

Also view, TV Panel discussion on this issue: click here:

https://sardanavijay.blogspot.in/2016/12/msp-impacts-lentil-price-to-go-lower.html