Government Procurement Of Pulses, Oilseeds At Record Highs

Nearly 5.8 million tonnes of oilseeds and pulses were procured in FY19, more than twice the 2.8 million tonnes procured in FY18, shows data from the National Agricultural Cooperative Marketing Federation of India.

NAFED is the largest nodal agency for procurement of pulses and oilseeds under the government’s price support scheme. Under the scheme, procurement is undertaken if the market price of stocks remains at or below the declared minimum support price.

The increased procurement came against the backdrop of continued strong production of these commodities and low prices. India produced 24.02 million tonnes of pulses and 31.5 million tonnes of oilseeds in 2018-19, showed the second advance estimates released by the Ministry of Agriculture in February.

Prices in the pulses category have been falling since 2017 due to higher production and increased imports. As measured by the consumer price index, the pulses category has been in deflation since December 2016.

The falling prices forced the government to step in to support farmers. The government had to procure pulses in large quantities as prices were in deflation, explained Abhijit Sen, former member of the Planning Commission.

The increased procurement, some moderation in production and reduced imports have together led to some pick-up in prices. At the retail level, pulse prices, as judged by the index levels, have been rising since October 2018, shows inflation data released monthly.

Still Below Target

While procurement in absolute terms is at a record high, it remains below the levels targeted by the government. This has limited the benefit of higher minimum support prices announced by the government in 2018.

In July 2018, the government hiked the minimum support prices for kharif crops to at least 1.5 times the cost of production. The same formula was used to set support prices for the Rabi crops. In absolute terms, the MSP for the Rabi season crops were raised between 6-21 percent.

For the ongoing Rabi season, 26.6 percent of the sanctioned quantity had been procured until May 18, 2019, according to data by NAFED. To be sure, there is still some time left before the procurement season ends in July 2019.

In the 2018 Kharif season, only 47.7 percent of the quantity sanctioned was procured, the data shows.

Agencies could not procure even half of the sanctioned quantity, said Soumyakanti Ghosh, chief economist at State Bank of India. As a result, food prices and rural demand remained weak in many states, he added.

The government started procuring pulses as part of the National Food Security Act, said Surabhi Mittal, a non-resident fellow for Tata-Cornell Institute for Agriculture and Nutrition. Pulses are not a part of the public distribution system and thus strategies have to be worked out about its procurement through the government system and its distribution, Mittal said.