Why MSP hike in pulses means little

Minimum support price up almost 50% in last five years but production not rising

The massive increase in the minimum support price (MSP) for pulses, announced by the government on Wednesday, is likely to have negligible impact on pulse production in India, if past trends are any indication. Pulses MSP has increased over 50 per cent in the last five years but the output has remained stagnant.

“It is not like an electricity switch which you put on to start a fan. But, definitely it will have a slow impact this kharif season and a cascading large effect on rabi season and thereafter. Acreage under pulses will definitely go up this year. Along with rise in MSP (and very high bonus), the government is working on to procure pulses for the first time, which will definitely encourage farmers to bring more area under pulses. Mind you, pulses enjoy the lowest cost of production with negligible use of fertiliser and insecticides with higher potential of production,” said Ashok K Vishandass, chairman of the Commission for Agricultural Cost and Prices (CACP) that recommends quantum of increase in the MSP every year.

The agriculture ministry has announced up to six per cent increase (including a bonus of Rs 200 per quintal) in MSP. With the increase, the MSP of urad touched Rs 4,625 a quintal for the crop year 2015-16 (July–June) as against Rs 4,350 a quintal the previous year.

In 2011-12, the government had raised MSP of pulses by over 33 per cent. But, owing to the subdued price trend, farmers refused to bring more area under pulses. Consequently, acreage under pulses declined to 24.46 million ha in 2011-12 as against 26.40 million ha in the previous year. Similarly, pulses output declined to 17.09 million tonnes during 2011-12 as against 18.24 million tonnes in 2010-11.

The recovery in prices the following years, however, inspired farmers to opt for pulses. In the following two years, not only acreage increased but production shot up to 18.34 million tonnes in 2012-13 and 19.25 in 2013-14. In 2014-15 again, pulses never moved up to Rs 35-40 a kg in wholesale markets, barring a couple of occasions, resulting in the output falling again to 17.38 million tonnes. Crop damage due to unseasonal rain also had its impact.

But, the government is betting big this time. Prices of pulses have started firming up in both wholesale and retail markets. In Asansol (West Bengal), tur is currently quoted at Rs 100 a kg as against Rs 75 a kg in January.

“When the prevailing market price is higher than the MSP, the expectations of farmers go high. Farmers will be motivated for higher acreage this year. The government is working on to narrow down the difference between consumption and production,” said Vishandass.

In spot wholesale market here on Thursday, urad and tur are quoted at Rs 70,000 a tonne and Rs 65,000 a tonne, respectively, almost 65 per cent increase in the last one year. With rabi crop estimated to have damaged due to unseasonal rains during the last harvesting season, pulses prices are likely to remain robust until the kharif crop hits the market. So, more than economic, the MSP hike will give farmers a psychological boost for higher area under pulses.

“The increase in MSP is irrelevant today. It is good encouragement which shows the government is concerned about declining production of pulses. More than MSP, high market prices would motivate farmers for higher acreage,” said Pravin Dongre, chairman, India Pulses and Grains Association, MSP up almost 50 per cent in last five years but production not rising.

Meanwhile, steady increase in consumption coupled with stagnant production has increased India’s reliance on pulses imports. India's pulses import is estimated to set the new all time high record at 4.5-5 million tonnes this year as against 4 million tonnes last year.