Rational Expectations: Dal Imagination

By: | Updated: July 9, 2018 2:00 AM

The plan is to provide about 70 million households with 2 kg of pulses every month at prices which are at least 50% cheaper than the market.

Making pulses part of PDS could increase import-dependence

Dal IMAGINATION: The Centre is mulling over bringing pulses into the PDS fold, in districts that are the worst-hit when it comes to malnutrition. The plan is to provide about 70 million households with 2 kg of pulses every month at prices which are at least 50% cheaper than the market. However, if this is done, it will not only worsen the market distortion problem that is congenital to PDS, the problem will also get exacerbated given the higher MSPs the government announced last week.

PDS and the attendant MSP-led procurement distort competition in the market and incentivise the cultivation of only those crops that are procured by the government procurement agencies—even under high-cost conditions, in geographies that are not conducive to the growing of such crops. Also, given India is a net pulses importer, diverting some of the pulses from the market to the PDS—against the backdrop of the sharp increase in MSPs—will mean that imports could go up and then the prices of pulses could rise significantly for those outside the PDS structure. This could, in turn, translate into low-middle-income families reducing their intake. To counter malnutrition and protein deficiency, the government should instead consider direct cash transfers to the intended PDS beneficiaries that allow them to buy pulses off the market. Given how a just-released OECD-Icrier study found that India’s agri & food policies—including those centred on procurement for PDS—depressed farm revenue between 2000 and 2016 instead of boosting these, it is important that the government does not expand the PDS ambit. The government, there can be no doubt, must tackle malnutrition urgently—as per government data, nearly 40% of all children under five years of age are stunted. But, that has to be done without distorting the market and transferring the deficiency to another chunk of the population.

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