The Hindu Business Line : Publicising pulses import decision can hurt India's interests

Mumbai April 20 Governments are known to do the most rational thing, but only after exploring other possibilities. It looks like the Indian government is groping in the dark and is yet to exhaust other possibilities.

This is evident from the public announcement that India would enter the world market in a big way to effect very large purchases of pulses.

On April 12, the Cabinet Committee on Economic Affairs chaired by the Prime Minister, Dr Manmohan Singh, decided that public sector agencies would import 15 lakh tonnes of various pulses to tide over shortage and stabilise prices. As is its wont, the media immediately picked up the story and flashed it across.

While the Government's concern over rising prices and need to augment supplies is understandable, the public announcement of intention to import betrays a complete lack of understanding of the commodity market dynamics on the part of policymakers.

One of the axiomatic principles of commodity trading is quick decision-making and a certain confidentiality or secrecy in entering into transactions. By announcing to the world the country's intention to import 15 lakh tonnes of pulses, the Government willy-nilly sent out a bullish signal to the global market.

It appears that the anxiety to get political mileage out of the import decision was far greater than the possible damage the announcement would do to the country's interests.

The global pulses market is not a large one like that of say wheat, maize, oilseeds or even rice. Total world exports of pulses are an estimated 3-3.5 million tonnes (mt). India is the world's largest producer, consumer and importer of pulses. Announcement of purchase of large volume (1.5 mt) is sure to propel international prices considerably higher.

Instead of buying without fanfare and quietly at stable prices, the Government's publicity has sent a bullish signal to pulses suppliers.

Overseas offers are already jacked up by $20-30 a tonne, according to trading houses. So, instead of bringing relief to domestic consumers, the Government's announcement is sure to deliver windfall gains to overseas suppliers.

In an integrated market, global players are already aware of shortages in India and the country's compulsion to import to meet the domestic shortfall.

Prices have, therefore, remained rather firm. The only silver lining is the appreciating rupee that's making imports less expensive.

If the Government thinks it can "talk the market up or down" by making brave announcements, it is sadly mistaken. The days of influencing prices with official statements are long over. Market participants both within the country and outside are well aware of the ground realities in terms of demand and supply.

Indian consumers are paying a heavy price for pulses for no fault of theirs.

In their anxiety to look after fine cereals (rice and wheat) the policymakers have remained indifferent to pulses cultivation. Without adequate policy support, pulses production has been languishing for over 25 years.

It is alarming that the per capita consumption of pulses - the so-called cheapest vegetable protein - is today the lowest in the last 50 years. The Economic Survey admits the per capita availability is just bout 30 grams per person per day. Even this low number masks a skew in consumption.

Annual pulses output has stagnated between 12 mt and 14 mt. Imports at 1.5 mt. to 2.0 mt. is totally inadequate to meet the food needs of people, especially poor consumers.

So, consumers should not expect any real price relief anytime soon. The only alternative is to raise indigenous production. The Agriculture Ministry has much to answer for the stagnation in production and its efforts to address the issues of the legume.

It would indeed be worthwhile to seriously explore supply of pulses under the public distribution system to support the really needy people - the poor and malnourished.

More Stories on : Pulses | Exports & Imports | Agricultural Policy

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