Along with bumper harvest, serious policy failures have also contributed to this.
What is India’s position?
India ranks first both in production and consumption of pulses and their import.
Domestic absorption in recent years has hovered between 21 million metric tonnes (MMT) and 23 MMT.
Production has ranged from 16.4 MMT to 19.3 MMT.
In 2016-17, India witnessed its highest ever domestic production of 22.95 MMT.
Why did production spike in 2016-17?
The record production has been attributed to a normal monsoon in 2016 and high market prices of pulses at the time of the kharif sowing.
Also, steep hikes in the Minimum Support Prices (MSP) by up to 9.2% for kharif and 16.2% for rabi pulses had aided the increase.
What else led to the excess supply?
Normally, in a year of such bumper production, imports would be expected to fall significantly.
However, India imported a record 6.6 MMT of pulses at zero import duty.
As a result, domestic supply of pulses in 2016-17 shot up to 29.6 MMT.
This is way above the typical supply of 22-23 MMT.
What is the solution?
Export Import Regulations - The landed price of imported pulses should not be allowed to adversely lower the market prices.
This calls for a proportionate duty on imports to protect local farmers.
On the contrary, if the government really favours free trade, as duty-free imports suggest, it should lift the ban on export of pulses that is presently in place.
De-listing - Pulses should be de-listed from the APMC Act inorder to enable farmers to sell freely to whosoever they like.
This will enable a better price realisation for the agriculturalists and a compression of the pulses value-chain.
Stock holding - The relevance of the Essential Commodities Act (ECA), especially the provision that imposes stocking limits, must be critically evaluated.
Unless private players are reassured that no ad-hoc stocking limits will be imposed, there will be no investments in building storage and efficient value-chains.
Such storage infrastructure will help absorb excess during gluts & address shortages during poor harvests.
Futures Trading - This should be allowed for all types of pulses so that planting and selling decisions of farmers are based on a futuristic rather than a backward-looking price information.
Public Buffer - With these policy changes, and a fairly reasonable buffer stock in place, the government can surely manage the pulses sector better.
