With an eye on incentivising pulses production, ending price volatility, and protecting interests of farmers and consumers, Chief Economic Advisor Arvind Subramanian has recommended, among other things, an increase in the minimum support price (MSP) for all pulses, elimination of the export ban and stock limits on pulses, and intensified procurement.

In a report, ‘Incentivising Pulses Production Through Minimum Support Price (MSP) and Related Policies’, submitted to Finance Minister Arun Jaitley, the CEA listed a series of measures, some to be implemented immediately and others in the medium term.

“The Centre should immediately announce a MSP of ₹ 40 per kg for gram for rabi 2016 and a MSP of ₹60 per kg for both urad and tur for kharif 2017 (adjusted for inflation),” the report proposed. Subramanian ruled out any inflationary impact from the proposed hike in the MSP.

New MSP formula mooted Significantly, the panel asked the government to instruct the Commission for Agricultural Costs and Prices to review its MSP-setting framework by incorporating risk and ‘social externalities’. MSP for pulses should be increased by the same percentage as calculated in this report for tur, urad, and gram, it said. It should be increased to ₹70/kg in 2018 when short-duration kharif tur is ready for commercialisation.

“Pulses have for long been the stepchild of Indian agrarian policies, which have always favoured cereals,” said Subramanian, who chaired the committee, adding that enhancing domestic productivity and production is the only way to minimise volatility in the pulses market.

The report recommends the report (PDF) the establishment of a high-level committee to verify whether procurement was taking place on the ground. It also wants States to be encouraged to delist pulses from their Agricultural Produce Market Committees.

The government should also work to build up a stock of 2 million tonne of pulses, with targets for individual pulses, especially tur (3.5 lakh tonne) and urad (2 lakh tonnes). These stocks should be built up gradually but opportunistically, buying when prices are low as in the current year, the report stated. Making a case for eliminating export ban on pulses and stock limits, the report suggested that limits on wholesalers should go.

“The greater the limits on procurement by the government, the greater the urgency to take these actions to ensure that market prices stabilise above the MSP. The worst-case scenario for farmers is weak procurement and stock limits (that) force farmers to sell most of their output at market prices that are well below MSP,” it stated.

It also called for a review of the Essential Commodities Act and futures trading of agricultural commodities and find more effective and less costly instruments for achieving the objectives governing these measures.

“There is a need for (a) less blunt and more calibrated instrument for controlling prices,” the CEA noted in respect of its suggestion for a review of futures trading; the recent fall in onion prices, it said, is a “good example of policy ups and downs impacting farmers’ incomes”.

The report also called for setting up a public-private-partnership institution to compete with and complement the existing institutions to procure, stock and dispose pulses. Subramanian also flagged the need to increase indigenous research in pulses and encourage development of GM technologies.