Commodity Analysis

A finger on the pulse prices

G Chandrashekhar | Updated on April 07, 2019 Published on April 07, 2019

The rates for most pulses still rule below MSPs, but the price direction is positive

More than 15 months after India imposed quantitative restrictions on the import of select pulses and customs duty on some others to arrest the unprecedented price plunge in the country, the Indian pulses market seems to have decisively bottomed out. The market fundamentals are gradually tightening as evidenced by rising prices of various pulses.

Admittedly, the rates for most pulses still rule below the respective minimum support price (MSP), but the price direction is positive. For instance, compared with an MSP of ₹4,650 a quintal, chana (chickpea) is currently trading at ₹4,300-4,400, while tur/arhar (pigeon pea) is being offered at ₹5,200-5,300 versus an MSP of ₹5,675 a quintal, reflecting a recovery of nearly 50 per cent.

Burdensome inventory had accumulated over two years (2016-17 and 2017-18) following record production (23-24 million tonnes (ml t)) and near-record imports (averaging 6 ml t a year). It may take another 4-6 months — taking into account festival demand — for the domestic inventory burden to lighten further and make the market more balanced.

A less recognised factor that has contributed to the market price performance is the government’s over-estimation of the crop last two years. Both chana and tur/arhar crops are at least 15 per cent lower than official estimates.

According to the government’s recent assessment, the chickpea crop now being harvested is 10.3 ml t, well below the production target of 11.5 ml t and 9 per cent lower than last year’s rabi’s 11.1 ml t. Given the lower planted area (down one million hectares from last year); unseasonal rains in some growing regions in the last couple of months; less-than-satisfactory input management by growers; and the relatively low yields, the actual harvest size of chickpea may be 8.5-8.8 ml t.

A combination of the ongoing harvest pressure and government stocks (estimated at 2.8 ml t) has kept the farm-gate rates of almost all pulse varieties below their specified MSPs.

One key reason for the prices to have remained below MSP is the steady flow of imported pulses in recent months by resourceful private traders who managed to obtain court orders for import despite restrictions. Based on court orders, an estimated 800,000 tonnes of pulses have arrived in India in recent months. The loophole has since been plugged. During FY2018-2019, India’s imports aggregated an estimated 2.0 ml t, significantly lower than the 5.6 ml t in the previous year.

On the other hand, Indian pulse export efforts have not been met with any notable success. An estimated 200,000 tonnes of pulses, mainly kabuli chickpea, was exported in 2018-19. The government has failed to leverage bilateral agreements with importing countries such as Bangladesh and Sri Lanka to promote export of Indian pulses.

Outlook

In the months ahead, the pulse market faces upside price risks from the supply as well as the demand side. There is the threat of El Nino which typically brings dry conditions. El Nino status has now been moved from the ‘watch’ to the ‘alert’ category. However, we do not know its intensity yet — mild, moderate or severe. We have to stay guarded.

The series of festivals in the months ahead will also ensure an expansion in the consumption of pulses, especially chickpea flour (besan). Ironically, a rise in pulse prices will be a welcome development for growers and policy-makers. State agencies can liquidate their stocks and cut their rapidly accumulating losses.

This year, India has promptly renewed the import quota for specified pulses for fiscal 2019-20. Import of tur/arhar (200,000 tonnes) and urad, moong and yellow pea (150,000 tonnes each) will now take place. After the general elections, the price situation may create conditions for a review of the import restrictions.

The writer is a policy commentator and an agribusiness specialist

Published on April 07, 2019

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Sincerely,

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.