Government-owned food grains procurement agency, Food Corporation of India (FCI), has suspended purchase of pulses from farmers under the minimum support price (MSP) operations for the current season.
The FCI claims that it had surpassed the pulse procurement target fixed by the Ministry of Consumer Affairs in the beginning of the season and is now looking for ways to dispose its stock. Farmers, however, are feeling trapped as pulse prices continue to slump, falling over 25 per cent below the minimum support price (MSP) in the open market. As against an MSP of Rs 5,050 a quintal, tur is selling at Rs 4,000-4,200 in the open markets.
FCI’s suspension of tur under MSP is likely to force farmers to undergo distress sales of the commodity. Many farmers held their inventory after harvesting for the current season amid expectations of a recovery in prices following supply deficiency. Since, India meets around 23 per cent of its annual pulses demand through imports, farmers’ strategy of holding stocks for better realisation makes sense.
“Effective April 22, we have stopped purchase of pulses for the current season after surpassing the government’s target. Now, we are looking to slow our pulse procurement in the forthcoming rabi season,” said a senior FCI official.
According to the official, the Ministry of Consumer Affairs had set a procurement target of two million tonnes of pulses for the current season. As per the plan, FCI distributed the stocks it procured for kharif and rabi season to the extent of 1.55 million tonnes and 0.45 million tonnes respectively. Informed sources said that the government agency surpassed the target for the current kharif season, procuring over 1.1 million tonnes of tur alone, and over 0.45 million tonnes of other varieties.
The agency has now started auctioning pulses. As per the official, FCI would give first preference to departments under the Ministry of Defence, such as paramilitary forces and other departments to dispose off the procured pulses, mainly tur.
It has also initiated dialogues with some state governments for selling its stock of pulses which, according to the official, would be the second priority. The third and last priority, however, would be market intervention i.e. selling in the open market which often takes place when the price firms up suddenly.
Meanwhile, farmers feel trapped in the price fall saga. After tur dal surpassed Rs 200 a kg in the retail markets last year, the local government of many states encouraged farmers to bring in additional area under pulses to fetch extra incomes. Tur dal is selling at Rs 60-65 a kg today.
“Farmers felt that the government would ensure at least Rs 5,050 a quintal for tur and that there would be an underwritten price for other pulses as well. However, the government agencies are no longer procuring. This would force farmers to sell their stocks at lower prices,” said a senior Mumbai-based pulses trader and importer.
Meanwhile, traders have started making the most of the situation. They have started offering Rs 3,000–3,200 a quintal to tur farmers. Pulse prices declined this year following forecast of a sharp increase in local output. The Ministry of Agriculture forecasts 4.23 million tonnes of tur output for the current season compared to 2.56 million tonnes for 2015-16. The overall pulse output in India is estimated to remain at 22.14 million tonnes for 2016-17, compared with 16.35 million tonnes last year. India imported around 5.5 million tonnes of pulses in FY 2016-17.