G Chandrashekhar

Pulses mismanagement has hit traders too

G Chandrashekhar | Updated on January 11, 2018

Weak pulses Traders are losing money MOHAMMED YOUSUF

This is because excess imports added to the difficulties of managing a bumper crop. Imports need better regulation

Despite record harvests and record imports, the year 2016-17 has been a challenging one for pulse growers and traders alike. Both categories of stakeholders have incurred heavy losses.

The loss suffered by growers has been on account of steep decline in farm-gate price of various pulses over the last six months or so. Their price realisation has either been less than the minimum assured by the government that is below the minimum support price (mainly in case of tur/arhar or pigeon pea for which MSP is ₹5050 a quintal but market price is ₹4,200) or substantially lower than the price at the time of planting that induced them to expand acreage (like in case of chana or desi chickpea — current price ₹5,100 a quintal, half of the price at the time of planting).

Comprehensive policy failure

It is a tragedy that policymakers failed to recognise the emerging situation. New Delhi’s indifference or inadequate intervention to support growers has spawned protests in different parts of the country. Farmers feel shortchanged because no one has come to their rescue when prices have collapsed, even as they came to the Government’s rescue by producing a record crop to contain high prices.

Not just in procurement, the government failed to deploy appropriate trade and tariff policies. It is most unfortunate, New Delhi’s tepid response to the price situation has left much to be desired.

Sadly, growers are not the only sufferers this year. The pulse traders including importers and dal mills have lost enormous amount of money as open market prices have sharply corrected down in the last six months as a result of the glut caused by record domestic harvest exacerbated by excessive imports. Also, a strong rupee has made imports cheaper.

For sake of record, it must be stated that domestic production in 2016-17 is estimated at 224 lakh tonnes (164 lakh tonne) and imports at 66 lakh tonne (59 lakh tonne) taking total availability to a new high of 290 lakh tonne. While no one needs to shed tears over losses incurred by the trade — they ought to have known the emerging market scenario — the after-effects of such losses and financial drain will be felt in the new harvest season four months away.

Unrestrained imports in addition to humongous domestic harvest has meant warehouses across the country are currently bursting. With market prices falling steadily because of continuing large imports and inventory pile up, the offtake is rather sluggish. Buyers are keeping off in anticipation of even lower prices.

Several traders this writer spoke with recently had their own tales of woe. At current prices, their losses are anything between ₹1,500-2000 a tonne. Even assuming conservatively that importers lost money on say 30 lakh tonne (close to 50 per cent of total import), the losses aggregate to a staggering ₹450-600 crore. Losses incurred by dal mills are manifold. It is feared that many financially weak traders will be forced to exit business, while the unscrupulous ones merrily default on commitments. A large number of defaults both in local trade and overseas trade are reported. Overseas sellers have turned cautious about striking forward deals with Indian importers for fear of further defaults if the market turns more adverse.

Monitoring imports

Unfortunately, the government has absolutely no clue how to handle the pulse situation because it is in the dark about the world market dynamics, the quantum and price of import contracts entered into and flow of goods in the domestic market. In other words, commercial intelligence within the various ministries is rather poor.

This was evident not only from the belated imposition of 10 per cent customs duty on tur/arhar imports, but also from the ineffectiveness of such imposts as tur/arhar coming from two major origins — Myanmar and East Africa — is exempt from such levy under bilateral pacts Obviously, the Government did not do its homework. It would have been more appropriate to canalise or channel tur/arhar imports through government agencies so as to restrict the volume of import and support domestic growers.

New Delhi has to be on top of the situation for which it is absolutely essential to immediately introduce a system of compulsory registration of import contracts through a government designated neutral agency like the DGFT. Registration of import contracts and monitoring of imports will provide the policy-makers sufficient data to regulate the market effectively.

The early trends in pulse planting are ominous. If these trends hold, the size of upcoming kharif harvest will shrink and possibly go below the target of 87.5 lakh tonne. In the event the present weak price sentiment can change. It would then be the turn of consumers to protest. All this is best avoided.

The writer is an agribusiness and commodities market specialist. The views are personal

Published on July 05, 2017

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