Policymakers are misreading the pulse

Has the Government failed the country’s pulse-growers this year? Isn’t last year’s ‘dal shock’ that hurt consumer interests still fresh in people’s memory? Did the avoidable pulse crisis provide any lessons to policymakers? These questions deserve to be debated. Consider the following facts.

To be sure, 2015-16 was a year of weather-reduced output, widened supply shortfall, tight availability, high consumer prices and heightened import needs.

The Government was completely on the defensive, clueless about how to handle the crisis.

Cut to 2016-17: the world’s largest producer, importer and consumer of pulses, India, has set another record by harvesting a humongous 221 lakh tonnes, a quantum jump from the previous year’s 163 lakh tonnes; at the same time it imported an unprecedented 63 lakh tonnes last fiscal, higher than the 59 lakh tonnes of the previous year.

In other words, output and import both hitting a new high is the defining feature of the pulse market performance this year. The impressive growth in production was aided by reasonably well-distributed rainfall, enthusiasm of growers in the wake of high prices during the planting season and consumers’ ravenous appetite for consumption given the price and income elasticity of demand for this essential food ingredient.

Higher agricultural growth generates higher rural incomes which in turn encourages consumption of various food products including pulses. The experience of 2016-17 demonstrates not only the huge unmet appetite for food consumption in India, but also the stark underestimation of demand by policymakers.

Where does the Indian pulse market go from here? India is at the crossroads.

In some regions, pulse growers are utterly disillusioned because despite harvesting record crops they have not received the remunerative prices they expected.

In Maharashtra and Karnataka, principal growers of pigeon pea, the harvested produce has been selling 10-15 per cent below the minimum support price (₹5,050 per 100 kg) assured by the Government. The pulse procurement programme of the Government that envisaged purchase of 20 lakh tonnes has had limited impact on supporting domestic prices, especially of pigeon pea.

Similarly, in the rabi season, unprecedented prices of chana at the time of planting prompted growers to expand the planted area; they harvested 91 lakh tonnes according to official estimates.

But market prices have halved to the current level of around ₹5,500/100 kgin recent weeks.

The question is whether disillusioned pulse-growers will once again plant record acreage.

There is a possibility they may not. Disgruntled growers will respond the only way they know — not plant the crop that failed to meet their price expectation.

Next year (2017-18) it is possible we may go back to the explosive 2015-16 situation of lower crops and heightened dependence on the international market.

Also, policymakers seem have no strategic action plan to ensure that the record production of 2016-17 is sustained in the upcoming season. Far from helping retain farmers’ enthusiasm, government’s superficial approach may have killed it.

In a year of bumper harvest, record import and price collapse, continuing storage restrictions and prohibition on export (except for kabuli chickpea) clearly go against growers’ interests.

The weather is sure to continue to play a critical role.

While the forecast is for a normal SW monsoon in 2017 (June to September), the harvest will depend on spatial and temporal distribution of rainfall as well as area planted.

Meanwhile, consumption demand for pulses will grow with the beginning of the festival season.

In the next three-four months the pulse market is likely to witness volatility, driven by the onset and progress of the monsoon, progress of planting not only in India but in other major origins too, currency fluctuations as well as government policy.

So, the big question is whether India’s record production and record import will be the new normal or will the new-found aggression fizzle out.

The writer is an agri-business and commodities market specialist