Bumper pulses output along with procurement by government through agencies like Nafed in the last two years has ensured piling up of large stocks of pulses, which has to be liquidated soon. In response to huge spike in pulses prices in 2016, the government hiked the MSP and commenced procurement of pulses in key growing states including Maharashtra, Gujarat, Madhya Pradesh, Rajasthan, Andhra Pradesh and Telangana. The result was a huge 42% rise in pulses output at 23.13 million tonne (MT) in 2016-17 crop year (July-June) compared to 16.35 MT in the previous year. The pulses output continues to grow in 2017-18 crop year at 24.51 MT.
Due to back-to-back record production years, retail prices have seen a sharp fall (see table). Although on one hand lower prices have benefited consumers, on the other hand agencies such as Nafed have huge inventories (close to 4.5 MT), which has to be liquidated fast to make space for new crops as well as recovering parts of the cost of procurement. The central government during two seasons—Kharif 2017-18 and Rabi 2018-19—has spend close to Rs 30,000 crore for purchasing mostly pulses and oilseeds from 35 lakh farmers at MSP under the Price Support Scheme (PSS).
The Centre commences PSS operations—through agencies like Nafed or the Small Farmers’ Agribusiness Consortium (SFAC)—following the request from state governments when prices of commodities fall below MSP. State governments also exempt the procured commodities from levy of mandi tax and assist central agencies in logistic arrangements including gunny bags, provide working capital for state agencies, creation of a revolving fund for operations, etc. The key objective of PSS is to provide remunerative prices to farmers for their produce, with a view to encourage higher production and to safeguard the interest of consumers by making available supplies at reasonable prices.
With the procurement for Kharif 2018-19 set to begin over the next couple of months, the Centre has been grappling with excess pulses stocks and is expected to announce a policy to allocate pulses to states at subsidised prices. States are expected to mill these raw pulses and distribute it through PDS.
Senior officials said the government would announce a scheme for introducing pulses under PDS in 200-odd districts that are ranked low in the terms of nutritional indicators. The average cost of procuring pulses is around `50 per kg (for Nafed), while the Centre would provide pulses especially arhar and gram (chana) to states at `35 per kg. The Centre would urge those states where agencies like Nafed had procured pulses from farmers at MSP to distribute pulses through PDS after milling. It could cost the Centre about `8,000 crore for implementation of such a scheme.
The central government’s plan is provide 70 million households in selected districts with 2 kg of pulses monthly at a price which is at least 50% cheaper than market prices. Currently, 5 kg each of rice or wheat is provided under the National Food Security Act to 81 crore beneficiaries across the country.
Of the pulses stocks of 4.5 MT, the farmers’ federation has 2.7 MT of gram or chana stock, while arhar stock is 0.9 MT. The federation has urad (0.3 MT), moong (0.3 MT) and masoor (0.2 MT) in smaller quantities. However, because of bumper produce, Nafed has been unable to sell large quantity of pulses from its stocks in the open market through e-auction—only 0.38 MT of pulses have been sold through e-auction so far.
“With record output, there are substantial stocks of pulses available with traders as well as farmers. Thus, there has not been an encouraging response to selling of pulses by Nafed in the open market,” a senior official said. Retail prices of pulses have stabilised across the metros. As far as kharif sowing is concerned, pulses sowing has declined compared to last year till now. However, with most parts of the country getting adequate monsoon rains, sowing activities are expected to pick up pace in the next few weeks. This implies there won’t be a substantial fall in pulses production in the next crop year (2018-19).
Thus, the government needs to liquidate excess pulses stocks held with Nafed over the next few months as Kharif crops like arhar, moong and urad is expected to enter the market by the end of this year. It is yet to be ascertained whether state government agencies have the capability to handle pulses distribution through PDS. Most pulses stocks need to be liquidated through PDS or in open market over the next six months because of quality issues.
A government official said the Centre’s attempt is to provide pulses through PDS in ‘poor’ districts of the country is a welcome initiative. However, the mechanism has to be robust so that pulses are procured, stored, processed and distributed at the local level. Recently, the Centre approved increase in MSP of kharif pulses for 2018-19—MSP for moong has been increased by more than 25% from the previous year, and for arhar and urad the increase in MSP has been moderate.
To ensure that agencies like Nafed do not hold excess pulses stocks, distribution through PDS needs to be streamlined at the state level, which would effectively deal with the issue of ensuring MSP to farmers as well as meet nutritional requirements of many regions.
The author is a Senior consultant with ICRIER. Views are personal.