CEA panel for higher MSP, removal of export ban on pulses

He noted the UN designating 2016 as the international year of pulses has come at an opportune time for India, which has been facing challenges in the sector over the last few years.

Speaking to CNBC-TV18, Subramanian highlighted the need to boost growth in supply of pulses. Supply growth has been a meagre 3 percent a year and the CEA panel suggests measures to lift the growth rate to at least 8 percent a year. He strongly believes depressing prices for farmers affects supply for the next season as farmers move prefer to away from the crop.Subramanian believes India can be self-sufficient in pulses in 4-5 years and this year too there is likely to be record production with no shortages. He feels there is need to increase competition in farm procurement and therefore, both government and private players should participate. On higher MSP sprucing up inflation, he is confident steady increase in production and productivity will certainly help keep it in check. Below is the verbatim transcript of Arvind Subramanian's interview to Arvind Subramanian on CNBC-TV18.Q: When do you think India can be self sufficient in pulses production?A: If we make a concerted effort at improving the incentives, creating better institutions, backing up our minimum support price (MSP) with our procurement, be open to the introduction of new technologies. There is no reason why we shouldn’t become self sufficient within the next 4-5 years.Q: One very interesting proposal that you have given in your report is regarding hiking MSPs. Now again you have defended that particular proposal by saying that it will not have an impact on inflation if you can explain that for us?A: Remember that what will keep inflation in check is a steady increase in production and productivity. Remember this is a commodity which can’t import very much especially tur and urad, so increasing supply, increasing production is the only surest way of keeping prices in check and therefore how do you increase production and what we find is that if there is volatility in prices going up and down, farmers are less incentivised to not only increase how much they produce, how much inputs they use and also the incentive to do research in this, so only by improving the incentives for production can you increase the supply in the medium term. The MSP will serve to increase supply and that’s why we think it may seem counterintuitive. That’s why I don’t think it will have any impact on inflation in the medium term.Q: Very interesting proposal on a public private partnership (PPP) model for procurement. Do you think industry will buy into this idea or secondly why not instead allow big institutions and companies to go ahead and do direct procurement couldn’t that be also a model for this?A: Remember in all these things it’s a question of how quickly or gradually you transition. At the moment we have a completely government dominated, all the institutions are in government. I think we need to move toward a situation where you have all kinds of player government and private and so we recommended the first step forward. People still want especially because it is a sensitive commodity people deep down want the reassurance that your government is broadly kind of has oversight and that’s why the institutional recommendation we have made it doesn’t say open it up to the private sector, but basically says bringing in more institution, increase competition and also increase not just the number of institutions, but also the types of institutions and that why our recommendation for a PPP type structure.Q: You have said that mechanism and tools like export bans they should be done away with, stock holding limits etc they don’t work, but at a time when we have a shortage and this shortage will continue for some time. Is there a case for removing export bans and removing these tools as of moment or do we see taking some more time and then using such?A: I think that’s a kind of a close call, firstly I think we are already heading to a situation where we are not going to have shortage, because I think this year we are going to get record production and we are going to have much more than we probably need take into count a normal import and the second thing is remember that with prices coming down so rapidly to me the kind of worst case scenario is the following that we are able to procure prices come down below MSP, farmers have to sell below MSP prices then they will say next year why should we produce and therefore next year supply will come down and then definitely prices will go up, because as I said this is not a case where we can import easily. I think that’s the perspective and framework one should have in thinking about all these policies about exports bans and stock limits.