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

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