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Dal farmers & traders fear big losses, dip in production after Modi govt allows free imports

Govt officials say there will still be MSP procurement, but farmers say imports will make prices crash. Traders also won’t earn much on stored stocks due to lower prices.

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New Delhi: The Ministry of Commerce and Industry’s 15 May order allowing free imports of certain pulses has disrupted market sentiments across India. Prices have already begun declining in the domestic market, and farmers and traders fear a further crash, as well as a dip in production.

The order states that for three kinds of pulses — tur/arhar, moong and urad dal — any party can import any amount till 31 October. The consignment can be cleared till 30 November, as long as it’s billed before 31 October.

The order has moved the import of these pulses from the ‘restricted’ to the ‘free’ category after more than three years. Since August 2017, the import of pulses was put under quantitative restrictions — the government limited quantity, or gave permission to import only to a few parties such as millers, traders and processors.

However, industry experts say the order is likely to lead to a price crash, which will hurt farmers because they were receiving above-MSP market prices for their produce. The farmers, in turn, could end up sowing a lower quantity of pulses in the next kharif season, pushing production down and further aggravating the situation.

It is also feared that the order could cause losses to traders, who purchased pulses at above-MSP market prices and stocked them. The price of pulses in the international market has already surged, anticipating the heavy demand from India.

But experts also say that consumers are unlikely to feel much of this price shock.

Also read: Modi govt plans to procure more pulses this year to guard against inflation & help farmers

Why govt made this move

Government officials told ThePrint that the free import order has been issued to “rein in the surging prices of pulses in retail as well as wholesale markets”.

The government estimates that due to unseasonal rain damage, the current stock of pulses in India will only last for three months, making the prices soar beyond the permissible limit of 5-10 per cent above MSP. Hence, it was necessary to open up imports.

A senior official of the Ministry of Consumer Affairs, Food and Public Distribution, who did not wish to be named, told ThePrint: “Currently, the country needs to import every kind of dal other than chana, due to lower crop size and current high prices amid the pandemic. Even NAFED has been able to procure only 2,52,000 tonnes of pulses till April, against a target of 2,75,000 tonnes. Due to this, NAFED doesn’t have a lot of stock to intervene in the market, necessitating the need to import immediately to avoid further distress in a pandemic.”

The official added: “According to our estimates, the new kharif harvest of tur, urad and moong will start arriving in the market from late December, as the sowing will also get delayed due to Covid restrictions. In the meantime, the import consignments will be cleared just till 30 November, so farmers will get reasonable market rates in December and there will also be procurement at MSP by the government.”

Declining prices

Department of Consumer Affairs data accessed by ThePrint shows that the prices of pulses in the wholesale market were well above MSP before the order. Tur/arhar was 15-20 per cent above the MSP (Rs 6,000 per quintal) at Rs 7,000-7,200 per quintal, while urad was trading 30-35 per cent higher than the Rs 6,000 per quintal MSP, at Rs 8,000 per quintal. Meanwhile, moong was selling at Rs7,600-7,800 per quintal, 5 per cent higher than the MSP of Rs 7,196 per quintal.

However, after the order, tur dal prices fell in the major wholesale markets of Gulbarga and Akola to Rs 6,680-6,750 per quintal. Wholesale urad prices also dipped to Rs7,100 per quintal, while the prices of moong dal also fell by Rs 500-700 per quintal.

This could impact farmers in MP and Gujarat, who have grown the crops and are waiting for markets to open.

Also read: Consumer demand drop in lockdown could cut palm oil prices, Vanaspati & soap costs may fall

Impact on farmers

The government official quoted above said the current decline in prices and the expected future shock won’t hit farmers too hard, since they don’t have much tur/arhar and urad stocks available right now on which they could lose money, and while they have moong stocks, these will also get cleared before imported stocks land in the country.

However, despite the government’s assurances of procurement at MSP, farmers who grow pulses don’t have the facility of unlimited procurement, like wheat and paddy under the National Food Security Act. Thus, a large number of them depend on market forces for price realisation of their produce.

Bhagwan Meena, the MP-based convener of the farmer body Kisan Swaraj Sangathan, told ThePrint: “Farmers faced heavy losses due to unseasonal rains last year, causing crop damage, but above-MSP market prices provided relief. However, such unrestricted import will make prices crash. The government only promises MSP and self-reliance to farmers, but does nothing to comfort them, and in this case, is working to hurt farmers and benefit consumers and traders.”

Meena added: “Despite above-MSP prices of pulses, farmers didn’t reap much profit as rain damaged most crops. However, return from soybeans was extraordinary, so much so that some of the farmers even sold the part of the harvest meant to be used as seeds. With pulses’ market prices crashing, farmers could opt to grow soybean in the upcoming kharif season rather than pulses.”

RSS’ farm affiliate Bharatiya Kisan Sangh had also demanded that the central government roll back the order. It said pulses included in import order are to be sown in the kharif season beginning soon, and if farmers are worried about low prices due to imports, it’ll affect the government’s push for an ‘atmanirbhar’ (self-reliant) India.

Rahul Chauhan, a researcher at commodity market research firm IGrain India, told ThePrint: “The order has made farmers anxious as they received above-MSP prices till now and stocked some pulses for better returns in future, as also due to Covid restrictions. But they will receive low prices now. We anticipate around 10-15 per cent dip in pulses acreage in the kharif season due to the import order. Farmers in major pulse-producing states like Madhya Pradesh might shift to soybean for better returns, as they faced losses in pulses this year due to bad weather, which damaged crops.”

Also read: Onion prices could make you cry again, a surge is expected before Diwali

Traders’ worries

Domestic traders are also worried that as prices of pulses crash in the domestic market, the stocks they purchased at market rates above MSP will cause them heavy losses.

Moreover, once imported pulses begin landing in the Indian market in the next few weeks and months, the losses are expected to amplify.

Mohit Upadhyay of HmvAgro, a pulse trader in West Bengal, told ThePrint: “Price dip in pulses has already started hurting traders who purchased and stocked pulses at above-MSP market prices in order to gain in future. As bulk of imported pulses will physically arrive September and October onwards, it would raise the risk of a price collapse both for domestic traders and farmers in the domestic market with onset of the next kharif harvest.”

International prices

Expecting a heavy demand from India thanks to the commerce ministry’s order, the prices of pulses in the international market have soared.

Urad prices have increased to US$850 per metric tonne from $750 between 11 and 19 May. In the same period, tur/arhar prices increased to between $840-950 per MT from $770-785.

Therefore, experts say that even though domestic prices crash, the consumer will not feel much of a difference in the prices of pulses in the short term.

“Domestic prices of raw and milled pulses have dipped by 10-20 per cent after the order, with an increase in international market. However, the dip in domestic prices might not trickle down to consumers in retail immediately,” said Rahul Chauhan.

Experts also expect domestic traders to wait for a while before releasing their stock at lower prices, until the imported pulses land in India.

(Edited by Shreyas Sharma)

Also read: Chicken or egg? Doesn’t matter, neither is really selling well since Covid hit India


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