Reining in food prices

Farmers need to be encouraged to grow more

The government seems to be fighting a losing battle against rising food prices. It does not seem to have a clue as to what really needs to be done to rein in the prices. Instead of focusing on tackling the supply-side glitches that are chiefly behind the price spike, it is holding the traders responsible for it. Such repressive tactics were routinely used in the past but without much success and were subsequently given up. However, instead of learning lessons from the past experience, the high-level meeting on food prices convened by Finance Minister Arun Jailtley last week once again decided to unleash agencies like the Intelligence Bureau and the Directorate of Revenue Intelligence on food traders to curb alleged cartelisation and hoarding. States were asked to conduct raids on traders disregarding the fact that such searches in several states in recent months yielded little.

Going by the latest official data, the consumer price inflation index touched a 19-month high of 5.76 per cent in May 2016, driven primarily by food inflation which has surged to 7.55 per cent from 6.4 per cent in April and 4.8 per cent in April 2015. The main contributors to this price spike are pulses, though the prices of some seasonal vegetables and fruits have also risen due to an adverse weather-induced dip in output. In the past two years, the prices of tur (pigeon pea) have almost doubled while those of urad have surged by 120 per cent and of chana dal by 85 per cent.

The signs of a shortfall in the production of pulses and consequent pressure on prices were evident from last year due to drought. Yet, instead of encouraging higher imports of pulses to augment domestic supplies, the government chose to build a buffer stock of these legumes partly through imports but largely through local procurement. Ironically, its local purchases further reduced available domestic supplies. Imports on the government account have been a pittance compared to an estimated supply gap of between four and five million tonnes. For private importers, the government has set difficult conditions, which have discouraged them from importing pulses.

The government's latest move to take on lease farmlands abroad, mostly in African countries, to grow pulses and bring them back to India may also fail to make much headway. Most African countries have already turned wary of such land deals and have banned them. Besides, given the unfamiliar agronomic conditions in foreign lands, cultivation of inherently low-yielding pulses may not be trouble-free. This aside, the recent move to increase the minimum support prices of pulses by big margins is unlikely to yield the desired results in the absence of adequate procurement infrastructure.

The need, therefore, is to offer sops to local farmers to extend pulses cultivation to irrigated or partially irrigated lands. The availability of short-duration crop varieties has made it feasible to fit legumes into the multiple cropping systems in agriculturally progressive regions. Also important is to speed up agricultural marketing reforms to achieve the objectives of ensuring remunerative returns to pulse growers and narrowing down the gap between the wholesale and retail prices.