While long-term solution will rely on increasing production, an outlay of a mere Rs 700 crore in the Union Budget can start restructuring the pulses sector
The rising and highly volatile prices of pulses are seriously affecting the budget of households, and pose a major challenge to the government to bring down prices and sustain them at manageable levels. In fact, the problem of high and variable prices of pulses has become perpetual for nearly a decade. The economics of this phenomenon is simple. The domestic production of pulses is unable to meet the demand consistently, leading to the spiral of price increases every year.
To fill in the demand-supply gap, imports of pulses has indeed expanded, and in value terms now belong to the billion-dollar club. Yet, given that few countries in the world produce pulses and India has a very large deficit across several varieties of the crop, the ability of imports to cool markets has been limited. India has struggled to import required quantities at reasonable prices.
Although the share of pulses in total value of agricultural output is only 5%, making it seem like a fringe crop, yet their rising prices have tended to create a political storm in the country. Since India is the biggest producer, consumer and importer of pulses in the world, an effective pulses strategy that results in significantly increased availability of the crop at affordable and stable prices is the need of the hour. The upcoming Union Budget is an opportune moment to start addressing the problems holding the pulses sector back. We propose a five-point package that we believe can increase the production of pulses and stabilise their prices.
One lakh pulses villages
Pulses are often grown in rain-fed areas having low yields, and are prone to several diseases and pests. The average yield of pulses is less than 800 kg per hectare. Due to subsequent droughts, production from a peak of 19.27 million tonnes in 2013-14 is expected to dip to 17.2 million tonnes in 2015-16. Notwithstanding the erratic climate pattern, raising productivity from the currently very low level should be the first step. Farm scientists claim the availability of high-yielding, disease-resistant and drought-escaping varieties for cultivation. To spread the improved varieties, the 60,000 pulses village programme may be expanded to 1 lakh villages for field-level demonstrations (at least five in one village, at the rate of Rs 3,500 per demonstration) by allocating a sum of Rs 175 crore.
Restructured pulses seed sector
Unlike crops such as maize, the pulses seed sector in India is weak; it is reflected in a strikingly low rate of seed replacement between 2% and 4%. A three-pronged strategy is needed to pull up the pulses seed sector.
One, the rate of innovation needs to get on a springboard by involving the private sector (conspicuous by its absence). This could take the form of a pull system of research of the type Kremer suggested for an HIV AIDS vaccine, albeit with much lesser value of award in this case. Essentially, the system would work as follows. If the traits that are desired are delivered by an innovation, the winners would get a big reward, but transfer the intellectual property rights to the government. The private sector, so far, has not come forward in pulses seed business due to its tiny scale and the public-sector seed companies are also wary for exactly the same reason. Overall, the playing field should be level between the private and the public sectors, including the NGOs, in terms of being eligible for the big reward if they deliver in terms of desired traits in this technology.
Two, there is an urgent need to expand the area under existing improved varieties and also increase the seed replacement rate. NGOs which are working at the ground level can be incentivised to produce and market improved varieties of pulses seed. To begin with, an allocation of Rs 400 crore may be made for producing and marketing about 20,000 tonnes of improved seeds by engaging NGOs in selected clusters.
Three, a system of seed certification should be developed such that better seeds get adopted and receive higher value, thereby encouraging innovation.
Promote farmer producer organisations
The Small Farmers’ Agribusiness Consortium (SFAC) is promoting farmer producer organisations (FPOs) to make smallholder agriculture remunerative through “farming together, growing together”. Commodity-specific FPOs are coming up for production, processing, marketing, retailing and export. Although some FPOs already deal in pulses, incentives may be given to form more and larger FPOs for production, processing and marketing of pulses. FPOs can play an important role in production, branding and linking with organised retail and processing. Incentives may be given to pulses FPOs for procuring machines for sorting, processing and packaging. A sum of Rs 5 crore may be allocated for incentivising or subsidising FPOs for credit, machines, etc, to develop the value chain for pulses.
Incentives to states
States may be given incentives for producing more pulses. Pulses fix atmospheric nitrogen in their roots. The following crop after pulses requires less of nitrogenous fertiliser (15-20%), and can thus help in saving costs of fertiliser subsidy. Pulses also contribute in improving carbon content of the soil and raise productivity for the subsequent crop. Therefore, states may be incentivised for these environmental services contributed by pulses. Any one or more states contributing, say, 1 million tonnes or more from the base year of 2014-15 may be given an incentive towards environmental services and saving in subsidies for nitrogenous fertilisers. A notional amount of Rs 20 crore may be allocated for giving incentives to two or three states.
The government may consider having a strategic reserve for at least two pulses crops, namely gram and tur. In the event of expected shortfall in supply and rising prices, strategic reserves may be used to release these pulses crops in the open market to control prices. For an efficient reserves management, it should be combined with price monitoring and early warning systems. By design, the reserves should be large enough to deter hoarding, but should not be excessive such that they become a fiscal burden. It can have a cooling effect on prices till the imports come in. In the long run, a strategic reserve of about 50,000 tonnes may be developed, which may be replaced on a regular basis. However, to begin with, a sum of Rs 100 crore may be provided in the Budget to build a reserve of about 10,000 tonnes for 2016-17.
A sum of Rs 700 crore will be needed to meet these proposed interventions. However, the long-term solution will rely on increasing production. India must target increasing production of pulses not only for domestic market, but also for meeting the growing global demand for pulses. This crop is the future food both for the developed world and many developing African countries. There are projections that global pulses consumption may grow by 10% in the coming decade and 23% by 2030. India has agro-ecology to grow different pulses crops in different seasons, but needs incentives and institutions. A small amount of R700 crore, which is a mere 1.3% of the total value of pulses production, will be the most important gift to the crop’s producers and consumers in the International Year of Pulses 2016.
Authors are with the International Food Policy Research Institute, New Delhi