Urad price crash puts Madhya Pradesh farmers in a bind

Two-thirds of farmers in state might lose 40% of their income

In the Bhopal agricultural market, the price of urad bean plummeted to Rs 1,500-1,750 per quintal in the last week of October, a meagre one-third of the minimum support price (MSP) set at Rs 5,400 per quintal by the government for the 2017 kharif season.

Even in Neemuch in the Malwa region bordering Rajasthan, where urad bean arrival has been one of the highest in the state till date, the price went down to Rs 3,450 per quintal, 60 per cent of the MSP. Owing to the 50 per cent jump in the area sown, supply glut was bound to play out. 

To counter the then imminent wholesale price crash, the Madhya Pradesh (MP) government announced a first-of-its-kind Mukhyamantri Bhawantar Bhugtan Yojana, promising to pay the difference between the market price and the MSP, if the former is lower than the latter, directly to the beneficiary farmer’s bank account (for eight major kharif crops). 

However, only a third of the eligible farmers — 1.9 million of 5.4 million — in MP have been able to register in the scheme, meaning a majority will not get remunerated at the MSP for their produce. According to government officials, to make matters worse, several traders have artificially lowered urad bean wholesale prices to 40 per cent of the MSP in the wake of the scheme, reducing their liabilities, and at the same time exculpating themselves from hurting farmers, courtesy the safety net of the Bhawantar scheme.

This has cut through the immediate income of a third of the farmers and has postponed it to the time when the government will transfer the remainder. For the remaining two-thirds, difficult times lie ahead. 

Some government officials have opposing reasons to give. “The prices have crashed owing to the poor quality of urad bean arriving at the market,” Premchand Meena, commissioner of agriculture, MP, said. 

Ramesh Parmar, market inspector at the Pipariya mandi in Hoshangabad district, which recorded the lowest wholesale price of Rs 800 per quintal on October 25, said, “Because of irregular monsoon and high rains at the time of harvest and storage, quality of urad bean diminished.” He said the rock-bottom price of Rs 800 was an anomaly but still conceded that the price was hovering in the range of Rs 1,700-Rs 2,400 per quintal in the market he manages. 

Pulses traders attributed the price crash to the poor quality of urad bean arriving at the market. The 2012 season — which saw a 30 per cent increase in MSP, the highest in a decade — had seen a similar wholesale price crash for urad bean, when it had fallen below Rs 3,000 per quintal against the MSP of Rs 4,300 per quintal. This time around, the crash is unprecedented; wholesale market prices are hovering between Rs 1,500-3,000 per quintal against the MSP of Rs 5,400 per quintal (see charts).

Though Bhopal has been the centre of recent protests against the incomplete coverage under the Bhawantar scheme and the price cash, most markets in the state are showing a deficit of at least 40 per cent from the MSP and previous year price, real time data from AgMarkNet show. Markets like Jawad in Neemuch, however, are paying the farmers at MSP but there are only a handful of such instances. 

Retail prices

The first urad bean of the season started arriving in primary markets across major producing states India in the first week of October. The retail price of urad dal (ready-to-cook processed and split urad bean) in Bhopal in the first week of October this year, at Rs 70 a kg, was 40 per cent below the retail price of Rs 120 a kg in October 2016 a year ago. 

South Indian states consume urad dal the most. Retail prices in these states are circling around Rs 90 a kg, higher than the national average owing to the demand there. 

Urad was sown on 4.3 million hectares in India, 50 per cent more than the five-year average of 2.8 million hectares, while 20 per cent more than last year (3.6 million hectares). 

The preference for urad was the most pronounced in MP. Sowing increased 110 per cent to 1.8 million hectares from an average 0.8 million hectares, while 53 per cent from last year (1.1 million hectares), replacing half a million of soybean sowing. Soybean farmers in MP are also bearing the brunt of falling market prices. Wholesale prices in various district markets are ranging from Rs 2,400 to Rs 2,700 a quintal, against the MSP of Rs 3,050 a quintal. Crops other than paddy (kharif) and wheat (rabi) are specifically at peril since the mechanism of procurement at MSP is successful only for these two crops.