Agri Business

Don’t destroy trader morale

G Chandrashekhar | Updated on March 19, 2019 Published on March 19, 2019

Raids recently carried out by the Competition Commission of India (CCI) on some business entities trading in pulses have exerted a chilling effect on the entire trading fraternity. Their morale has taken a hit as memories of indiscriminate raids and seizure of stocks from several pulse traders in 2016 are still fresh and haunting. If anything, many are still trying to recover from the shock. It may be recalled that in 2014-15 and 2015-16, following poor precipitation and El Nino driven dry conditions, the country harvested just about 16-17 million tonnes of pulses, far below the consumption needs. New Delhi’s response to the looming shortage was tardy, to say the least. The shortfall was met through large-scale imports. Private traders imported humongous quantities from different origins around the world to feed the domestic market.

Given the unfortunate combination of chronic domestic shortage, rising international prices and a weak currency, domestic prices escalated sharply. Retail prices went through the roof with milled pigeon pea (tur/arhar dal) selling at ₹200 a kg. The differential between wholesale and retail prices widened to uncomfortable levels that hurt consumers and put policymakerson the defensive. A series of administrative actions (read, raids and cargo seizure) was unleashed on the trade to contain the negative fallout.

Fortunately, in the last two years, India has moved well beyond the spectre of shortage and large-scale imports of pulses. Production has rebounded to a new high of 23-24 mt (16 mt in 2015-16). Additionally, from August 2017, New Delhi has imposed quantitative restrictions or customs duty on imported pulses.

As a result of the rebound in production from 2016-17 onwards, it is not consumers, but growers who are suffering low prices. The farm-gate rates of most pulses still rule below the minimum support price announced by the government. The government’s procurement efforts have had limited impact. Even opening up of pulses export has not helped prop prices.

It is under this very different scenario that CCI’s raids have taken place to investigate a situation that obtained three years ago, but that is not valid anymore. What purpose the fresh investigations will serve or what new facts they will reveal is anybody’s guess. But, reckless hounding of the trade creates its own risks. It is essential to recognise that distributive trade in agricultural commodities, especially food products, plays a significant role in the country. Traders are important participants in the supply chain. Members of the distributive trade ensure that goods reach every nook and corner. A disenchanted and demoralised trading community is not good for the economy as the primary producer — often the grower — will be hurt the most.

It would be naïve to assume that as a nation we have reached self-sufficiency in pulses production. If anything, our agriculture is fragile and vulnerable to the vicissitudes of nature. India is only one bad monsoon away from a farm disaster. There are clear signals of an emerging El Nino. While we do not as yet know its intensity, we cannot ignore the risk. In the event of a fall in domestic production of pulses, the government will have no choice but to ask traders to import. While investigation and action as warranted should be taken, New Delhi must ensure that the morale of the trading community is not destroyed.

The writer is a policy commentator and agribusiness specialist. Views are personal

Published on March 19, 2019
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