AVOID PANIC ON PULSES
SHORTAGES OF PULSES— GOVERNMENT SHOULD DESIST INTERVENTION. LET PRIVATE
TRADE OPERATE.
CANADIAN YELLOW PEAS ARE THE ONLY RESCUE REMEDY.
TEJINDER NARANG
The Government has estimated (3rd
advance estimates of Ministry of Agriculture) production of pulses in 2014-15
at 17.38 million tons vs 19.25 million tons of last year – a deficit of about
10%. This shortfall is close to 2 million tons and considering the world wide
availability of imported origins—be it Myanmar, Canada, Australia, Ethiopia,
Tanzania Malawi or Mozambique, Indian annual demand of 23-24 million tons can
abnormally spike the world prices. What are the carry in stocks after
accounting for last year imports is a big question mark.
India is a regular importer of 3.5-4.5 million
tons pulses per annum. But due to huge decline in domestic availability this
year and rising consumption, import pull could be 5.5 to 6 million tons which
could come at a huge cost. Sensing imminent drop in output, international
bidders have already raised their CIF quotes between 8%-16% of various pulses
in less than a month (see chart). This is indeed contrary to the trend of fall
in agro-commodities prices by more than 20% in last one year.
Sharp vertical movement in domestic
prices are already reflecting the intensity of shortfall. Chick peas (Chana) can be taken as the
dominant and representative illustration of supply and demand mismatch during
one year. Chickpeas price in NCDEX futures was about Rs 27/kg in May 2014 and
about Rs 45/kg this year---increase of 67%. Similarly Urad (Black Matpe) and
Tur (pigeon pea) prices have risen by 35% and 45% respectively on annual basis.
WPI of the entire pulses complex on year to year basis in 2014-15 is up by 15%
vs -1.64% in 2013-14.
During 2006-11 GOI had mandated
STC, MMTC, PEC, NAFED to import 1.5 million tons pulses per annum (or 0.375
mill tons or 3.75 lakh tons for each PSU out of which 50% were to be yellow
peas) and distribute them in the market at a discount (subsidy) up to 15%
depending upon the market conditions. A CAG report of December 2011 castigated
these PSUs, Dept. of Consumer affairs (Ministry of food) and Ministry of
Commerce for incurring a loss of about Rs 1200 crores (out of which about Rs
897 crores or 75% was attributed to import of yellow peas) on various accounts
including poor handling and distribution by PSUs and lack of issuing guidelines
/ monitoring by the concerned Ministries. CAG may be right in certain respects but
the scheme was intended to make losses—that is to import at higher price and
sell at lower price-- to hammer down the escalating local prices. But there are
lessons to be learnt by looking at the rear view mirror for avoiding the
erroneous approach in the future.
The government must maintain
hands off approach in the current scene because of unpredictability and
volatility of pulses prices. The moment government intervenes in any commodity;
it flashes a signal of shortage and induces bullishness in that particular
commodity. If the central and state agencies start issuing bulk tenders of
import of pulses, it is going to fire international prices because of poor
surpluses in world market. Private trade will be forced to stay aloof from
sourcing the commodity for the fear of steep escalation of import values and
simultaneous fall in prices in the Indian Bazaar due to subsidization by the
government, thus accentuating scarcities.
PSUs have no wholesale or retail
outlets. Resorting to tenders for disposal through wholesale traders is long
drawn out process—because traders after furnishing the performance bond of
5%-10% can relax for speculating the best prices. This leads to imported cargo
remaining stocked and undelivered in the market for considerable length of time
despite its availability in India. Encashment of performance bonds is no
solution to rein shooting values of lentils and grams. The objective is to
inject surplus in the supply side and create deflation. Levying penalties on
traders provides no respite from higher prices. It is only when traders invest
their own funds, then their speculative greed can be contained. The
distribution system of wholesalers, dal mills and retailers is well-entrenched
and the creation of any new structure would be to reinvent the wheel.
Both Chickpeas and yellow peas
are vegetarian nutritional protein of 20-22% potency. India imports about 2
million tons of peas from Canada/Ukraine /France—the largest being Canada with
annual production of 3.8 million tons. Indian trade has no alternative but to
secure the major shortfall in Chickpeas by “adding” imports of about one
million tons of yellow peas from Canada. Ukraine/France yellow peas are
considered inferior by Indian trade. Moreover their availability is also
limited. Yellow peas are priced at Rs 27-28/kg against Chana /Chickpeas cost of
Rs 45/kg. Cheaper yellow peas will put downside pressure on expensive chickpeas
and prompt substitutional consumption.
Import of Chickpeas, Pigeon
Peas(tur)and Urad (Black Matpe) from Myanmar , Australia and African countries
cannot augment more than 0.5 million tons and that too at zooming prices. Total
supply from Myanmar is 5.1 million tons of beans and pulses, while their
domestic consumption is 3.5 million tons. Balance 1.6 million tons is exported
to India, China, Bangladesh, Pakistan and elsewhere. Thus these countries
cannot be banked upon for extra supplies to India.
Pulses come in raw form and
require polishing, splitting, sorting, packing etc with 75% recovery rate—a
task that cannot be effectively undertaken by any official agency. Let the
private trade take initiative to import, process and distribute. Wholesalers,
dal millers and retailers have payment, lending and credit arrangements that
are beyond the purview of PSUs. The prescription from the Government is—do not
panic and don’t indulge in bulk imports through PSUs or for the state
governments. Accord priority to import vessels for unloading if there is port
congestion. Do not insist on methyl bromide fumigation of cargos and facilitate
entry with aluminium phosphide fumigants. Importers can operate freely only if
there is no fear of other parallel channels with subsidised prices. Avoid enforcing
any stock limits. Impositions of stock limits choke arteries of distribution
and thus are counterproductive.
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