Commodity Commentary. New Delhi’s pulses policy flip-flop betrays muddled thinking

Recent policies of the government impacting the pulses sector betray New Delhi’s confused thinking and knee-jerk reaction. First, as part of the agri-market reform package the government placed pulses, among other essential commodities like oilseeds, outside the purview of the dreaded Essential Commodities Act.

The move was sought to be justified on the ground that removal of stock limit and other restrictions would enhance the marketability of the crop so as to help growers dispose of the harvested produce expeditiously while processors, exporters and others could build adequate inventory with confidence.

The Agriculture Ministry’s third advance estimate released on May 25 placed pulses production for 2020-21 at a record 25.6 million tonnes (previous year 23.0 ml t), although private estimates were at least 10 per cent lower. Despite the government’s claim of record production pulses prices escalated well above the minimum support price (MSP) in March-April adding to food inflation triggered by rising crude oil and edible oil prices in the international market.

It is axiomatic that the market is the final arbiter of the supply-demand fundamentals; but the government refused to see the reality. As panic set in, production numbers were questioned.

On May 14, millers, importers and stockists were asked to declare stocks on a real time basis. This upset traders who turned apprehensive although stock declaration seemed innocuous on the face of it. Despite release of import quotas for financial year 2021-22, tur/arhar (pigeon pea), urad (black matpe) and moong (green gram) was set free for import till October 31. Under the conditions that obtained then, import liberalisation was a welcome decision.

In the meanwhile, the market started to cool; but the worse was yet to come. On July2, the government invoked the ECA to re-impose specified stock limits on wholesalers, retailers, millers and importers of pulses. This is sought to be justified with statement that it is part of the government’s consistent effort to crackdown on prices of essential commodities like pulses.

In effect, the crackdown is not on prices, but on the pulse sector stakeholders including growers, millers and traders. The new clampdown completely negates the justification proffered when ECA was diluted. While extraordinary situations demand extraordinary policy responses, there is nothing to suggest that pulses would contribute to runaway inflation.

Pulse traders today are a nervous lot. They have not forgotten the hardship suffered during 2015-2016 with indiscriminate raids and seizure of stocks. It is important for policymakers to recognise the critical role of the distributive trade that ensures essential foods are distributed throughout the length and breadth of the country round the year.

Government’s flip-flop shows it in poor light. There is lack of commercial intelligence and market outlook. New Delhi has little clue about correct crop size, demand requirement, import needs, actual imports and price outlook. Stakeholder consultation is the way forward. The importers and traders deserve to be treated with respect and not seen as enemies of the state.

(The author is a policy commentator and agribusiness specialist. Views are personal)

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