The Hindu Business Line : Will the pulse improve?

The imposition of a ban on futures trading in two pulses (tur/arhar or pigeon peas, and urad or Black Matpe) was not entirely unexpected. The consumer discomfort over rising prices of essential food products was fast turning into unrest, with serious political implications, especially in the context of the impending elections in Uttar Pradesh, Punjab and elsewhere. For the Centre that has in recent months found itself completely on the defensive over the galloping inflation, the ban on futures trading was a facile option; but the timing took almost everyone by surprise. It can of course be argued that market participants should have had advance notice or time to square up positions. But given the nature of this business, a decisive instant action was probably thought the best way to ensure no one got away with undue advantage.

A concerted hue and cry over the embargo has already begun as the stakes of market participants are huge. All kinds of comments are being offered including damage due to loss of confidence in the country's nascent futures industry and absence of price discovery for farmers. The reality, very simply, is that political compulsion is the over-riding factor and the `political risk' the market faced has manifested itself. Whether prices of pulses will react to the decision and prices of other essential food commodities such as wheat and edible oil will follow suit in sympathy and even apprehension, only time will tell. But it would be a tragedy if policymakers begin to believe that the job is done with the de-listing of pulses futures contracts on national exchanges. The latest move could encourage illegal trading.

A more critical dimension is that attention should not be diverted from the `real' issue which is that agricultural growth rate overall, and that of essential food crops such as grains and oilseeds, has failed to keep pace with rising consumption demand in recent years. In the case of pulses, the situation is worse as the country has been a major importer for over 25 years now. Successive governments simply failed to pay adequate attention to two important crops that are critical for the country's nutritionally-challenged population — pulses and oilseeds. The present situation is a testimony to the failure of agricultural policy.

It is time to take a serious look at structural issues and what needs to be done to increase productivity and production of pulses. Cultivation on unirrigated land, low level of input usage and poor agronomy combine to depress yields, while lack of policy support in terms of marketing opportunity (unlike, say, wheat and rice procurement) discourages growers. The market is volatile because of the demand-supply mismatch and the dependence on imports. High open market prices of pulses hurt poor people the most. It may be time to seriously consider supply of pulses — the cheapest source of vegetable protein — through the public distribution system.

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