Published On: Wed, Aug 24th, 2016

Facts behind Politics over Pulses Crisis

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Author: Vijay Sardana

Are political parties ignorant of ground reality or are they deliberately misleading our Nation?

On 29th July 2016, the main opposition party of India issued a press statement on pulses crisis and also raised issues in parliament on pulses price inflation and supply crisis and how this country is looted by traders with the support of ruling party. There were very strong words used. In my reply, I am also trying to use the words which should convey the same intensity. By no means I want to undermine political establishments and political people, they play important role on policy making, but when some political representatives from opposition camps, are trying to mislead the public at large for political gain is not appreciated.

This is a classic document to understand, how much background work political parties do in the interest of citizens of India, and how much time and resources they invest in misleading the nation. The Author is tracking developments of pulses economy globally, and this is an attempt to analyse the statements issued by main political party, based on factual situation of pulses.

Issue no 1: Dal is a man-made crisis because there is no food security plan in India till date.
Press release of the main opposition party which ruled India (for over 60 years out of 70 years) since independence, says that dal is a man-made crisis. The demand for dal is increasing and no attempt was made in the country to improve the productivity of dal. Every year about 15 million people are added to the population register, but supply per capita of dal is shrinking. According to my calculations, dal shortage will continue for at least next 10 years because of the demand-supply gap of about 25 to 30%. The biggest question is: Why is there no food security plan in India?

The real issue which the main opposition party should answer, is that why in the last 60 years of their rule since independence, is there no National Food Security Plan? It is clearly a man-made crisis.  Will they now force national and state governments to come-up with National Food Security Plan?

Issue no 2: Dal (pulses) Crisis’ is a ‘Man-made Scam’ of over Rs.2,50,000 crores (about USD 37 billion)
Nature or God never create scams. According to various estimates, the total pulses production in India is about 17 million tons and demand is about 23 million tons. There is gap of about 6 million tons.

Majority of pulses in India are produced in the states which were till recently and are ruled by opposition parties. All agriculture activities and commodities are controlled by state governments, because agriculture is a state subject. Are we saying that in man-made crisis of Rs. 250,000 crores (about USD 37 billion), state governments are party to this crime? If scam is of Rs. 250,000 crores, it comes to about Rs. 147 per kg of locally produced pulses. It will be useful, if all state governments including ruled by opposition also tell us how much mandi-tax i.e. transaction taxes state governments have collected on pulse from market yard in last 10 years. This will tell us whether pulses production has gone up or gone down. This is not clarified in press note.

The real Issue is: There is no attempt by any state government irrespective of political parties to improve the productivity of pulses. They may claim they are doing, but the ground reality speaks the facts. Pulses are treated as orphan crops that is why productivity of pulse is one of the lowest among all crops in India and also the productivity is stagnant from last 20 years and per capita availability of pulses is going down. When there is increase in personal income, people will prefer to improve the quality of diet and demand for pulses goes up. This leads to inflationary pressure.

To understand the situation better, state governments should make their accounts public to understand how much mandi-tax they have collected from pulses. This will tell us, at what price pulses were sold in state market yards and who much was paid to pulses. Why states are hiding this fact? If pulses producing states are not willing to share the data, this means they do not have any record of pulses production and all these production figures are fictitious and actual supply is much lower than what is projected by state governments. This will clarify that major cause of pulses inflation is outcome of the shortage of pulses in domestic supplies.

Issue no 3: Allegation is that Pulses are purchased from farmers at Minimum Support Price (MSP) but sold to consumers at high retail price.
It seems the political parties are either not aware of the mandi trading system or trying to act ignorant about ground realities.
In ideal situation farmers must sell higher than MSP, because MSP is the minimum price which he should get for his crop. I challenge anyone who says pulses are traded and sold in mandies/market yards by farmers at MSP, please book 100,000 tons or million tons order for me right now and I will sell at market price. In fact, I will bid for all MMTC tenders and get all orders and will also offer some to political party who will help me in arranging pulses at MSP. I will be very happy to the political parties for making me billionaire in shortages possible time.

Or, they should help MMTC in procuring pulses from the states ruled by them at MSP price, this will be the biggest service to the nation by any political party.

Issue no 4: Pulses have huge cost escalation between MSP and MRP
Once again, it seems that people advising the political parties are either ignorant of the facts or misleading their political masters. I request, political party spokespersons, Let any politician enter into agreement that I will provide you pulses and you will deliver me the pulses in the manner it is sold in the market by charging the services charges and processing charges which they are claiming in their press note.

Many political leaders are in pulse business as well. It will be useful if political spokespersons visit their factories and understand how pulses are processed, packed and handled. What is the yield of the pulses after milling and what is the cost of processing including cost of capital, salaries and wages?

Unfortunately, all the data provided in the press release of the political party clearly indicates, that they have no clue about what they are talking and their data is also fictitious. I using these words, because they are trying to paint everyone as criminals and that only this particular political party is the ‘honest group’ working in national interest.

Issue no 5: Stock limit in Pulses trade
Whenever there is a price rise, the first allegation that comes up is: hoarding is going on and there must be stock limit. This is one of the most illogical argument one can have while trying to control food inflation. When prices of green vegetable goes up, who is hoarding green vegetables? When price of milk goes up, who is hoarding milk? When fodder prices go up, who is hoarding fodder?
On one hand, we debate in parliament that there are no storage places in India; a reason why there is massive food wastage in India. Government of India offers financial support from tax payer’s money to create warehouses and on the other hand, we claim that all material like pulses are in warehouses and hoarding is going on!

Last year there were more than 10,000 raids. What was the outcome? It has made the situation more complicated for India. Importers felt there is no need to buy pulse in bulk and they stopped entering into large contracts and country suffered supply problem, this further aggravated the inflation problem. Now, world over all traders knows, ‘pulses’ is a politically sensitive topic for India. They have changed their game plans and India is the only loser because out of 15 million tons of pulse traded world-wide, India buys only 30% of the world trade. There are many markets around the world and more profitable. So, why deal with India when they can make more money outside India? Why should they waste their time in India and address illogical arguments raised by political system in India? The only outcome is that Indian consumers are suffering.

It is high time political parties understand that political statements without logic make situation more complex as normal trade practices get distorted. Illogical decisions cannot change demand-supply situation.

What is the future of Pulses in India?
Demand for pulse in India is about 26 to 28 million tons and this is growing at the rate of 1.5 million tons annually due to growing population and growing per capita income.

Last year, India produced about 17 million tons of pulse. This year due to good monsoon, it is estimated that pulse production will be about 20 million tons. Who will supply the remaining 6 to 8 million tons?
It is high time we must accept the fact, that like edible oil India cannot produce pulse to meet her demand. International market will fill the gap. According to my calculation, even if the best of technologies are provided and the requisite infrastructure is created, it will take at least 10 years to fill the demand-supply gap in pulses, provided state governments cooperate and do not misbehave due to political compulsions. Till 2025, India will remain dependent on imported supplies for pulse and edible oils. This will cost India about US$40 to 50 billion annually.

My humble request to all political parties is please spend time in parliament and draft a national food security strategy and its execution plan in place of drafting press notes which are factually incorrect and misleading.

If anyone has any confusion, author will be more than happy to share all calculations and supporting information on all the points mentioned in this note.

About the author:
Profile of Vijay Sardana :
Vijay Sardana is a well known and experienced corporate manager, speaker, writer, author, blogger, corporate trainer and business adviser on subjects related to economic policies, consumer-agri-food products and rural and bio-economy. He is currently involved in various capacities with various leading organisations in India and abroad.

He is an alumni of well-known leading institutes like IIM, Ahmedabad, CFTRI, Mysore Collage of Dairy Science and Indian Law Institute, New Delhi and also acquired professional qualification from WIPO, Geneva and Harvard University, USA with wide global experience of more than 20 years in various leadership positions.

He has committed himself for the development of globally competitive, efficient and fair agribusinesses and commodity markets with the deep and insightful knowledge, experience, insight and understanding of complex interrelation between social, economic, technical, legal and political aspects of global bio-economy.

He has travelled more than 27 countries and worked on wide range of issues affecting agro-commodities and agribusinesses from almost all agro-climatic situations on various aspects with wide range of business houses, international development organizations and policy making bodies around the world.

Mr. Sardana has contributed through his projects, trainings, writings, researches, critical analysis for various stakeholders and during interactions with various committees of policy making bodies, institutions and publications and invited to many national and international forums like WEF, Grow Africa, WBCSD, IGD, etc.

His blog, “Vijay Sardana Online”, is read by million plus people in more than 150 countries and he has contributed more than 500 articles related to agriculture, agribusinesses and related issues. He had authored popular book titled “Guide for HACCP Implementation in Food Industries”.

His understanding of complex dynamics of commodity markets and agribusinesses is a great asset for business leaders, equity investors, professionals, executives, farmers and policy makers. He is among the few whose in-depth knowledge and hand-on professional work and views are well recognised in commodity trade and agro-based industries.

Blog: Vijay Sardana Online
Twitter: @vijaysardana
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