Procurement worth Rs 30,000 crore failed to lift prices of pulses: Nafed

The main state-run food trading agency tasked with buying items such as pulses from farmers to blunt the current farm crisis has said its interventions (worth nearly Rs 30,000 crore) weren’t quite successful in improving prices for cultivators because of “very low market sentiment”.

This is an acceptance of the widely held view that “procurement operations” — or buying of farm produce, particularly pulses and oilseeds — by the National Agricultural Cooperative Marketing Federation of India (Nafed) did little to crank up prices for farmers.

Nonetheless, a key benefit of the government’s aggressive procurement of pulses, a glut of which had caused huge losses to farmers, was that it “definitely helped to arrest a further fall in prices,” a Nafed official said.

“If Nafed presence was not there, prices would have fallen even more. We helped improve the sentiment,” said SK Singh, additional managing director of Nafed, claiming that data show there has been a gradual improvement in prices of pulses but it is “difficult to quantify at this time”. “There is about a 20% gap between market prices and minimum support prices . If the gap is about Rs 200 a kilo, then Nafed’s procurement can improve prices, but market prices were too low,” said Singh.

Read: Poll risks, global slowdown: Indian economy looks to overtake UK as 5th biggest economy, but pitfalls ahead

Minimum support prices (MSPs) are federally fixed benchmark rates that farmers ought to get to remain profitable. Prices of many pulse varieties have fallen below the minimum support prices.

For instance, on September 13, in the Ganj Basauda mandi of Madhya Pradesh’s Vidisha district, urad (black lentils) sold for ? 2,800 a quintal (100 kg), compared to an MSP of Rs 5,600 (that’s 50% lower), according to price data cited by Siraj Hussain, former agriculture secretary and senior visiting fellow of the think tank ICRIER.

Singh’s comments, in response to questions on why Nafed’s steps had not been of much help, throws fresh light on what might be behind the persistently low returns earned by farmers, which has thrown a political challenge to the Narendra Modi government ahead of general elections in the summer.

First, since 2017, Nafed had launched one of its most “active” procurement of pulses ever to mop up the surplus produce to help boost prices for farmers, Singh said. However, market prices were too low for Nafed to be effective in ensuring farmers minimum support prices. This implies that since private traders were not keen on buying much, the entire burden fell on Nafed, which can’t influence prices all on its own.

Singh did not elaborate why traders or the private food markets were so low on sentiment. “That is not something I am not qualified to answer,” he said.

Read: Farm loan waivers can derail India’s growth story

The central government, through Nafed, spent a record ?29,070 crore to buy 6.34 million tonnes of summer pulses and oilseeds from farmers in the 2017-18 crop season. Between 2014 and August 2018, the total procurement was 7.533 million tonnes, compared to 0.84 million tonnes between 2010-11 and 2013-14. This spike suggests the government’s intervention in markets grew as farm distress increased.

In a comment given to HT last month after a field visit to Punjab, Siraj Hussain said market sentiment could have been a function of the larger political economy, including demonetisation in November 2016.

“We were told by traders that they are simply not stocking food commodities after demonetisation as they are short of cash,” he said.