The Centre needs to feel the pulse of chana

The yearly MSP raise remains unhelpful as it’s not backed by effective procurement

Unfavourable regulations and policy flip-flops have led pulses to witness substantial price corrections in the last two years. In 2016-17, India imported the highest ever quantity of pulses, despite bumper domestic production, setting a bearish trend for the commodity category.

Chana (gram), which forms the lion’s share (over 40 per cent) of India’s total output of pulses, is currently trading at ₹3,200-3,400 per quintal, almost 25 per cent lower than its minimum support price (₹4,400/quintal), thanks to comfortable stocks, continued import, muted demand and expectation of a good harvest.

Apart from the supply overhang, chana has been at the receiving end of unsupportive government policies. However, the worst days seem to be behind for the commodity as the ruling BJP can ill afford to anger the chana growers in Madhya Pradesh, Rajasthan, and Chhattisgarh where Assembly elections are due in 2018, and in Maharashtra in 2019 — all BJP-ruled States.

The extended monsoon and remunerative prices seen in the previous year influenced the planting decisions of farmers and significantly pushed the crop’s acreage up, especially in MP, contributing nearly half of the country’s total estimated output.

This will help India achieve a record chana harvest exceeding 11 million tonnes in 2017-18, higher by 18 per cent from 2016-17. In addition to the adverse price impact of a good harvest and competition from cheaper peas (a substitute for chana), the pressure of continued imports seemed to have negatively impacted the market sentiments, pushing the chana prices down.

Support measures

To restrict the free fall of chana prices, the government took a slew of measures, starting with the imposition of 50 per cent import duty on yellow peas, followed by 30 per cent import duty on chana and opening up of exports of all kind of pulses including desi chana, towards the end of 2017.

However, these support measures came too late to limit the fall in chana prices, and the government had to further increase import duty to 40 per cent in February 2018 and then to 60 per cent a month later to restrict cheaper imports from Canada and Australia. Of late, the Centre has also extended support to chana exporters by providing them incentives at 7 per cent for a limited period of three months.

Despite that, the exports are not happening as Indian chana remains highly uncompetitive in the global markets due to high support prices.

The high MSP sounds quite supportive; but in reality, it has neither helped the farmers nor the exporters. The increase in MSP every year remains unhelpful as it’s not backed by effective procurement.

Demand prospects

The MP government has withdrawn chana from the Bhavantar Bhugtan Scheme this year due to lack of financial support from the Centre.

However, in an effort to fix the mess in chana and woo farmers ahead of the crucial State elections, the ruling governments of MP and Rajasthan have started procuring chana, which is expected to continue until the peak arrivals. MP has announced a special incentive of ₹100/quintal for chana sold during the 2018 rabi marketing season. Chhattisgarh has announced a support price of ₹1,500/acre for chana farmers post their ‘chana satyagrah’.

Outlook

The upcoming Ramzan demand, the procurement drive and the support measures extended by major producing States are likely to induce buying at lower price levels and thereby strengthen the prices. The peak demand of chana generally falls in between August and mid-November. So, we may expect bulk buyers to enter chana around the current price levels as further slides in the prices are unlikely. The major impact of duty hikes will be seen after May when the flow of new crop arrivals will decrease, and by then the excess stock will be consumed.

Moving ahead, things are likely to get better for chana.

The writer is Vice-President, and Head of Agriculture, Food and Retail at Biznomics Consulting.

Read the rest of this article by Signing up for Portfolio.It's completely free!

What You'll Get





Related

MORE FROM BUSINESSLINE


 Getting recommendations just for you...
This article is closed for comments.
Please Email the Editor