Commodities

Prices of pulses are rising, and growers are relieved

G Chandrashekhar | Updated on September 10, 2020 Published on September 10, 2020

Import curbs, government’s welfare programme, dip in inventory and sporadic reports of crop damage have aided the price rise

There is some good news for pulse growers, especially as we head into Kharif 2020-21 season harvest. After languishing well below the specified minimum support price (MSP) for about 30 months, pulses market is beginning to come to life.

In recent months, rates of most pulses have come off their lows and are currently testing their MSP — which augurs good for the upcoming Kharif harvest season. A combination of factors has contributed to this development seen positive for pulse growers.

Restriction on imports, inordinate delay in issue of import permits, government’s welfare programme (distribution of free ration to vulnerable families), reduction in burdensome inventory and sporadic reports of crop damage have all meant that the pulse market fundamentals (supply-demand) are gradually moving towards a state of equilibrium.

In 2018 and 2019, the domestic market was beset with excess supplies, poor demand growth and low price for growers. Thankfully, it is changing now.

For instance, from around ₹4,000 a quintal three months ago, chana (desi chickpea) price has increased by 20 per cent to trade around ₹4,800. Encouraged by festival demand (especially for gram flour or besan) the price is poised to move above the MSP of ₹4,875/quintal in the weeks ahead.

The arrival of freshly harvested Kharif pulses – mainly tur/arhar (pigeon pea), urad (black matpe) and moong – has started in some areas. Unlike in the previous two seasons, when rates collapsed well below the MSP which necessitated State intervention, this season growers should feel relieved.

As compared with the season’s MSP of ₹6,000/quintal, tur/arhar is currently trading between ₹5,800 and ₹6,500 a quintal depending on quality, moisture and other parameters. This is in stark contrast with farm-gate rates of less than ₹4,000 that prevailed in 2018 and 2019.

At around ₹6,500-7,000, moong rates are currently trailing the season’s MSP of ₹7,200 a quintal; but it is a matter of time before the market improves further. Moong is a versatile pulse with varied application as food ingredient. Urad, too, has seen a rise in rates towards the MSP of ₹6,000 a quintal.

With market prices moving closer to MSP, the pressure on government agencies to undertake price support operations will be minimal in the upcoming Kharif harvest.

ECA amendment

A contributory factor attributable to the recent price performance of pulses is the amendment to the Essential Commodities Act under which pulses, among other commodities, have been kept outside the purview of the law which means processing mills, exporters and traders can build inventory without fear of a sudden imposition of storage restriction.

Amendment to ECA has improved the marketability of pulse crops and is benefiting growers directly. The price performance of pulses is a welcome development as growers are the beneficiary after at least two years. This feel-good atmosphere should not be disrupted.

Rising pulse prices at the farm-gate or wholesale level should be a cause for celebration, and not of concern. This price rise should not be mistaken for inflationary trend as it simply affirms that the market is striking a balance between supply and demand. It should not be misconstrued.

The unjustified recommendation of RBI (based on retail price spike following lockdown in and panic buying by consumers) in May this year to review pulses import duty is fresh in memory. That retail prices of pulses are twice the wholesale rates is another story that deserves a different set of policy response.

The writer is a policy commentator and agri-business specialist. Views are personal.

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Published on September 10, 2020
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