Mains Paper 3: Agriculture | Issues related to direct and indirect farm subsidies and minimum support prices
Once you are done reading this op-ed, you will be able to attempt the below.
“Pulses are an interesting and unique commodity group in the Indian agri-food space.” What are the issues faced by pulse production in India and suggest remedies?
From UPSC perspective, the following things are important:
Prelims level: MSP
Mains level: Pulses and related issues
- India ranks first not only in Pulse production and consumption, but also their import.
- Domestic absorption in recent years (2012-13 to 2015-16) has hovered between 21 million metric tonnes (MMT) and 23 MMT, while domestic production has ranged from 16.4 MMT to 19.3 MMT.
- In 2016-17, India witnessed its highest ever domestic production of pulses — a staggering 22.95 MMT.
Reasons behind record production?
- It can be attributed to a normal monsoon in 2016 after two consecutive drought years
- High market prices of pulses prevailing at the time of the kharif sowing
- Steep hikes in the Minimum Support Prices (MSP) — up to 9.2 per cent for kharif and 16.2 per cent for rabi pulses.
- These favourable conditions significantly drove up kharif acreage to almost 36 per cent above normal.
- The production of kharif pulses increased by nearly 70 per cent in 2016-2017 over that of the previous year and the total production of pulses increased by about 40 per cent.
What are the problems involved ?
- Despite such such bumper production India imported a record 6.6 MMT of pulses, valued at nearly $4.3 billion at zero import duty
- As a result, domestic supply of pulses in 2016-17 shot up to 29.6 MMT, way above the typical supply of 22-23 MMT.
- This glut in domestic supplies caused wholesale prices to crash, despite a bold and first-of-its-kind effort by the government to procure around 1.6 MMT of pulses.
- If there is no change in the government’s methods, we may either witness a decline in production of kharif pulses or another price crash this year. That may spur another round of farm loan waivers.
Solution to this problem??
- The landed price of imported pulses should not be below the MSP of domestic pulses, else the MSP is irrelevant
- Exports of all pulses must be opened up without any quantity or minimum export price (MEP) restrictions. Export restrictions betray anti-farmer policies.
- Pulses should be de-listed from the Agricultural Produce Market Committee (APMC) Act so that farmers can sell freely to whosoever they like,
- Essential Commodities Act (ECA), especially the provision that imposes stocking limits, must be critically evaluated and the act should be amended drastically
- 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.
- Give the farmer right incentives — at least some reasonable margin above the cost of production.
- Futures trading should also 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.
- News: So far, the area sown with pulses is 39% more than what is usual by this time of the year which is a record high
- Reasons: Higher prices of pulses have led to farmers planting different varieties like arhar and urad
- Also, higher planting in states like Rajasthan, Madhya Pradesh, Karnataka and Maharashtra
- Background: In the past two years, consecutive droughts have led to a dip in production and record imports, spiking prices
- News: Though the government is aiming to tackle inflation, especially in pulses, the price rise of the protein source might affect nutrition of a sizeable population
- The UN’s Food and Agricultural Organisations’ India representative said that impact of increase of pulse prices on various income groups may be unequal
- The consumption of pulses will be reduced especially among people in the lower income bracket
- Importance: Pulse is an important source of protein in India with a large vegetarian population
- Context: Maharashtra Cabinet approved the draft of the Act to control soaring tur dal prices
- Provision: Traders will have to sell pulses at government-approved rates for six months
- Unique: With this, Maharashtra becomes the first State to take such a regulatory step.
- Also, Pulses, despite not being part of foodgrains available under PDS, are the only food items whose prices will be directly controlled by the State
- Criticism: Going back to the infamous ‘Licence Raj’ of the past
- Benefit: Will bring relief to consumers, and check malpractice that have been going on for long
- The Centre will step up its efforts to expedite imports of pulses, to keep the price of pulses under check by ensuring adequate availability in the market.
- India had produced 17.2 million tonnes of pulses this year and imported 4.5 million tonnes.
- Earlier, the IT dept. had conducted searches on pulses traders and commodity business centres in several cities.
- The search operations were a part of their investigation into alleged tax evasion in the pulses trade and allied activities.
In a bid to keep pulses price under check, that went sky-rocketing during past few months, the Centre has decided to do it.
- Cabinet Committee on Economic Affairs (CCEA) gave its approval for creation of buffer stock of pulses. The buffer stock will be created in current year itself.
- Procurement of pulses will be done at market prices through the FCI, the National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED), the Small Farmers’ Agribusiness Consortium (SFAC).
- The procurement in kharif and rabi 2015-16 will be done at market price above MSP out of the price stabilisation fund.
- This move will reduce a price fluctuations and will also help in providing remunerative prices to farmers in times of excess production.
- The agricultural experts stressed on the need to develop new varieties of pulses with higher yield.
- This will protect farmers’ interests and people will not be deprived of nutrition.
- Govt. should push for technological advancement to increase the productivity of pulses.
- To improve and develop new varieties of pulses, huge investments in R&D is required to be made.
- The overall yield of pulses in India is far lower than the world level of 910 kg per hectare.
Importers seek exemption from stock limits
- The Centre declared that the 82,462.53 tonnes of pulses seized in various States under the Essential Commodities Act would be made available in the open market.
- To augment supplies and arrest further hike in the prices of tur and urad dals.
- No word on the rate at which these pulses will be made available in the open market.
- Pulses importers and millers have urged the government to lift stock holding limits on pulses.
- Pulses prices shot up due to shortage in supplies owing to drought.
- States have started selling pulses at prices much lower than the market rates, either through govt. agencies or the PDS.
- Earlier, Centre appealed States to supply tur dal at reasonable rates.
- The Union govt. has announced that it will create a buffer stock using imports, as prices of pulses shoot up.
- The Price Stabilisation Fund of the Centre will be used to cool prices of pulses.
- The creation of the buffer stock of lentils mainly through imports will help to address the supply crunch.
- Ministries of External Affairs and Commerce working on proposal.
- The quantum of sugar annually getting accumulated in the last four years has been quite substantial.
- India is the largest producer as well as largest importer of the pulses. Why is that so?
- Pulses being rich in proteins act as a main source of protein for the large vegetarian population of the country.
An analysis on why farmers prefer to grow cereals rather than pulses found that pulses are among the least productive of all crops.
- Low yields on the one hand and relatively more lucrative MSP for other food grains make pulses an unattractive crop for farmers.
- Pulses are increasingly grown on less fertile land, thereby impacting its yield.
- The technological advances failed to increase the yield of pulses significantly, unlike cereals, which saw huge increase in productivity.
- Price of pulses have augmented up by 64% in last one year.
- Pulses production fell from 19.78 to 18.43 million tonnes in one year.
- Quantum of pulse imported by India – 4 million tonnes.
- Imported by – State owned trading firms such as MMTC
Pulses are important source of protein, high in fibre content and provide ample quantity of vitamins and minerals. India having the largest shares about 25% production, about 33% acreage and about 27% consuming of total pulses of the world.
Although India is the highest producer of pulses in the world, its domestic demand outstrips domestic production. The shortfall is met from imports. In last 1 year prices of pulses have increased sharply which has made pulses unaffordable for the common man.
In this article We will explain why despite India being the largest producer of pulses, the price of pulses have increased so rapidly and we will also discuss steps taken by government in this regard and why those steps have not achieved intended results.
- What Factors caused increase in prices of pulses in recent years?
- Government steps in recent years to curb pulse prices
- Why government steps have failed to reduce prices?
- Will creating buffer stock for pulses would be able to curb pulses price?
What factors caused increase in prices of pulses in recent years?
- Draught: Successive back to back drought i.e failure of crops in 3 successive seasons biggest reason for current price increase in pulses
- Low MSP: Low production of pulses due to Lower MSP prices for pulses in comparison to wheat and rice and even this low target for pulses procurement is not realized by the government, all these factors disincentives farmers towards pulse production.
- Grown in only Marginal Land: Since pulses could be grown in marginal land, a trend has developed in India where pulses are only grown in marginal and arid lands and mostly by small farmers, all this has led to low productivity for pulse crop. Only 15% of the 25 million hectares area sown annually for pulses in India is irrigated, compared to 60% for paddy and 90-95% for wheat and sugarcane
- Limited option of import: Option of import are limited in case of pulses since its production is restricted to few countries in Africa and Asia and even there due to lack of local demand, the production of pulses are low.
- Rise in demand: Rise in rural income due to MNREGA and better functioning of PDS has increased demand for protein rich food including pulses in last few years.
Steps taken by Government in recent years to curb pulse prices
- Banned exports and future trade in pulses.
- Created buffer stock for pulses
- Government has signed agreement with Mozambique under which India will encourage greater production of pulses in Mozambique with an assurance that it will be purchased by India at a mutually-agreed price.
- Allowed import of pulses at zero duty.
- Government has imported 50000 tonnes of pulses and also subsidized the domestic cost of transport, handling and milling through a price stabilization fund.
- Imposing essential commodities act and cracking down on hoarders and black marketer through imposition of stock holding limit.
- Government has increased MSP price of 2 pulse crops i.e. Arhar and masur by Rs 250 per quintal.
- Inclusion of cluster demonstrations in rice fallows for pulses cultivation in rabi season from 2015-16 under BGREI (Bringing Green Revolution in Eastern India) scheme in order to increase production of pulses in Eastern India in states of Assam, Bihar, Chhattisgarh, Jharkhand, Odisha, Eastern U.P. and West Bengal
- A special programme for demonstration of new varieties of pulses through Krishi Vigyan Kendra (KVKs) has been taken up from Rabi 2015-16 in order to increase availability of seeds of new varieties of pulses and promote adoption of new varieties
Why government steps failed to reduce prices?
- Firstly steps taken against stockers are discouraging them to further invest in warehouses and cold storage. In the absence of stockiest, market prices of pulses collapse, discouraging farmers from growing them in current season.
- Secondly by suspending future and forward market in pulses, the government has simply shot the messenger. Forward and future market give signal about likely future prices and if harnessed they could actually help the government take preventive measures.
- Thirdly government imported just 7000 tonnes to tame prices, whereas overall consumption is 3.3 to 4 million tones.
- Fourthly the government announced MSP norms in November 2015 , which had a limited impact on Pulse production in 2016, since by that time farmers had already made decision regarding which crop they will sow in rabi season.
Will creating buffer stock for pulses help curb the rising pulses price?
- Creation of buffer stock of 150000 tonnes from both domestic production and imports could reduce fluctuations in prices as the accumulated reserve could be released in market whenever price of pulses spikes
- It could also increase production of pulses, since The Food Corporation of India, National Agricultural Cooperative Marketing Federation of India, Small Farmers’ Agribusiness Consortium and other agencies would be engaged in purchasing the crop from farmers.
- The payment for these purchases would be made from the price stabilisation fund created by the government. This will encourage farmers to take up pulses production on a larger scale and will enable India to help achieve self-sufficiency in pulses in a few years
- However buffer stock alone would not be able to curtail price in the long run, alongside this step the government has to take number of other steps which include
The Way forward?
- Create a crop-neutral incentive structure for farmers, which at present are skewed in favour of rice, wheat & sugarcane. This could be done by rapidly increasing MSP for pulses in next few years.
- Greater public investment in providing irrigation facilities in areas under pulse production could increase productivity of pulses
- Augment seed availability of pulses
- More allocation should be done on scientific research related to pulses varieties so that better varieties of pulses could be developed