Subsidies fail to contain rising pulses prices

The subsidies to the public sector agencies for the import of pulses may not contain the rising prices, according to importers.

The government should ask PSUs to obtain pulses from private importers and then reduce rates in accordance with subsidies provided, they said.

In a letter to the Ministry of Agriculture, the Pulses Importers' Association (India) said, "PSUs hardly ever get the best deal from the global market even though the government is spending sizeable money." Hence the government decision to provide subsidies for imports seems unhelpful, the letter added.

The Cabinet Committee on Prices (CCP) has decided to continue the current policy to pick up 15 per cent of the loss on every import deal of pulses by PSUs. Under the current system, PSUs have to issue global tender for buying pulses. When the import tender is floated, overseas traders are immediately alerted about the demand from India and raise prices by 8 - 10 per cent, the letter said.

Commodity analysts said the global pulses rates were on the rise and the demand from India was a contributing factor in increasing the rates further up. Meanwhile, the demand-supply gap in the pulses segment in the country is also rising. "Indai is one of the largest producers as well as the largest consumer of pulses in the world, and to a large extent determines the world prices," said analysts.

Speaking to Business Standard, K C Bhartiya, president of the association, asked the government to extend the 15 per cent PSU subsidy to private importers as well to calm the soaring pulses market in the country. However, market experts have ruled out the possibility.

Pointing out flaws in the subsidy strategy, the association said, "PSUs issue another tender in India for selling their imported cargo. This enables local traders to pick up imported cargo at below world prices and then sell it at a profit to the consumer... at a high level."

"The purpose of giving subsidies to public units is to help in lowering the prevailing rates of pulses in the country. But this doesn't seem to help and affect customers more," said S P Goenka, a Mumbai-based pulses importer.

Myanmar is the second largest supplier of beans and pulses to the country. India imports around 85 per cent of pulses harvested in Myanmar, importing as much as 95-98 per cent of Myanmar's tur to the country.