Soaring tur and moong dal prices have set pulses racing of the political class and the aam aadmi alike, albeit for different reasons. Food inflation has been making headlines for a while now, but this time around all hell seems to have broken loose with tur dal prices rising to more than Rs 210.
And the worst may not even be over yet. Former Reserve Bank governor and ex-PMEAC chairman C Rangarajan told CNBC-TV18 last week that there are indications that the CPI inflation will start rising because monsoon has not been good. "We could expect some little rise in the overall food inflation not necessarily cereals, but pulses, vegetables and so on," according to him.
Coming back to the problem of soaring tur prices, the question is could the government have seen this coming? Yes, say Ashok Gulati, chair professor for agriculture at ICRIER, and Shweta Saini in their column in The Indian Express, given the deficient monsoon. India's pulse production fell by more than 2 million tonnes in 2014-15 over 2013-14. "While traders had their ears to the ground, the complacency of government officials has resulted in the present situation. The time to act was then," say the duo in their column.Government's counter measuresTo combat rising prices, the government is planning to hike minimum support price (MSP) for lentil, chickpea, moong and urad dal, reports CNBC-TV18. It is likely to be raised to around Rs 300 per quintal to encourage pulses farming.
This follows a long list of measures that the government has already taken to tame prices — curbs on stocking, importing 7000 tonnes of tur dal, reducing import duty to zero, export ban, use of Essential Commodities Act, raids on hoarders, among others — with little or no impact.
However, it doesn't appear as though much thought has gone into these measures, at best these can be termed as knee-jerk reactions. The government's stock limit approach — the cap on how much a trader can store — has backfired and is now one of the leading causes of soaring prices. Case in point: About 250,000 tonnes of pulses — including tur dal, yellow peas, masoor and chana — is stranded at Mumbai and Jawaharlal Nehru Port Trust (JNPT), The Economic Times reports. Now, if the state government does not exempt imported pulses from stock limits, prices will continue to rise till these carriers move to other ports for offloading.
Need for stock limit review?
The harvesting season typically for pulses is between one and three months, with consumption spread through the year. In such a scenario, storage becomes a necessity to ensure smooth supply throughout the year. But the moment the government imposes stocking limits, legitimate stockists become hoarders, Gulati and Saini point out. And while in the short-term, seizing these stocks from 'hoarders' may bring down prices, the government appears to be completely ignoring what will happen to supply in the coming months.
Gulati and Saini say this move of the government will also discourage future investments in warehouses and cold storages.
A way out may perhaps be for the government to go in for regulated storages, where everything is monitored. The government perhaps needs to look at public private partnerships in this department (cold storage/ warehouses).
Why auction seized pulses?
The Maharashtra government has seized about 67,000 tonnes of hoarded pulse, but it may not come as any relief to the consumers. The government plans to auction this stock back to the traders. This essentially means the pulses will come back into the market through traders who had according to the government inflated prices by hoarding a few days ago.
In a scathing attack, Shirish Deshpande, chairman of Mumbai Grahak Panchayat (MGP), told Hindustan Times: "It seems like the government has an understanding with traders that after seizing the pulses, it will give them back to traders. Otherwise, why is the government in a hurry to auction the seized stock back to the traders? This will allow the cycle of inflation and hoarding to continue."
Age old demand-supply issues:
All this is but a result of demand-supply mismatch at the end of the day. Despite tur being a part of the rich man's diet (not consumed by the lower income group), or as economics textbooks refer to it as a 'superior' good, the country is facing such a shortage. It is hence obvious that as incomes increase, the demand for such goods increase more than proportionately.
In a column in Business Standard, Subir Gokarn, director of research, Brookings India, and former deputy governor of the Reserve Bank of India, says a long-term supply enhancement solution is imperative. While small quantities of imports are feasible and will provide some relief, the fact is tur is not widely cultivated globally. "It would be wise to enter into long-term supply contracts with land-abundant countries such as Australia, some African countries and so on. India has to start thinking globally about food security, just as it has been doing about energy."
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