Centre’s pulse procurement strategy has gone awry

After failing to support pulse growers adequately through timely, effective and adequate procurement, the government now finds itself in a quandary over disposal of about 16 lakh tons that its own procurement agencies are holding.

The entire process of procurement, storage and disposal is expected to involve a humungous amount of subsidy; and, sadly, despite the high cost to the exchequer, growers are far from happy.

The pulse subsidy has several components.

Market prices of most kharif-harvested pulses have been ruling below the minimum support price (MSP) specified by the government. For instance, tur/arhar or pigeon pea has been trading at about ₹4,000-4,200 a quintal, far lower than the MSP of ₹5,050 a quintal.

Historically, the ‘carrying cost’ (storage, interest, handling loss) incurred by government agencies is far higher than that of the private sector. In the case of pulses, the cost is about ₹250 per ton per month. Warehousing procured pulses for 4-6 months will push the cost up by ₹1,000-1,500 a ton.

In order to liquidate the stocks, policymakers have decided to supply pulses to paramilitary forces, defence establishments and State governments based on their requisition. But raw pulses procured by the agencies have to be milled before they become fit for human consumption. Milling will result in ‘processing loss’ to the extent of 15-20 per cent, depending on the type of dal. The price at which milled dal is sold/supplied to defence and paramilitary establishments is unclear. Most likely, these supplies will also involve an element of subsidy.

It may not be possible to dispose of the entire quantity procured by the state agencies before the next crop become ready for harvest by September. A part of the cargo will have to be sold in the open market; and surely, the market will shun the ‘high-priced’ material offered by the government. Selling at the market price will mean further losses (procurement price plus carrying cost minus sale price).

In other words, the government’s pulse procurement operation in 2016-17 is characterised by inefficiency and high cost to the exchequer. Yet, despite the high cost, growers are far from happy with the support they received, making the entire effort a failure.

Apart from protests across the country, growers’ anger will clearly manifest itself in the planted acreage for 2017-18. The initial trends in planting bear this out; in all likelihood, kharif pulse harvest will fall well below the target of 87.5 lakh tons, neutralising the production gains made in 2016-17.

This once again draws attention to the utter lack of focus within the policymaking circles on finding effective end-to-end solutions to the issues dogging the pulse sector covering production, procurement, distribution and trade. The government has not acquitted itself well in this case. In the coming months, the country may well go back to the price situation that prevailed in 2015-16.

Among the designated agencies, the lead agency, the National Agricultural Cooperative Marketing Federation (NAFED), purchased about 9 lakh tons of pulses in 2016-17, followed by the Small Farmers’ Agribusiness Consortium (SFAC) and the Food Corporation of India (FCI).

The writer is a global agribusiness and commodities market specialist. Views are personal

COMMENT NOW