Dal Prices Again—This Time It’s The Farmers At Receiving End

Favourable weather and low incidence of pest and disease attacks blessed the tur or pigeonpea crop in Gulbarga (a.k.a Kalaburagi) in North Karnataka this year. Arrivals at the mandi on the day this correspondent visited it last month were 5,035 quintals against 3,405 quintals the same day the previous year.

Expanded supply has dampened prices. The weighted average rate in the Gulbarga yard was 4,326 a quintal against 9,536 the same day a year ago. At the Yadgir market, about a 100 km away, the price of red tur that day was Rs 4,526 a quintal ─ a drop of more than 50 percent from a year ago.

Because of the fall in prices, the action had shifted outside the Gulbarga mandi, where there was brisk procurement by Nafed, a central government agency. The centre had offered to buy pigeonpea at Rs 5,050 a quintal. The state government has thrown in a bonus of Rs 450.

Shivananda Choragati of Gulbarga taluk’s Bhimally village arrived at the procurement centre at 10 pm the previous night to be an early bird. He cultivates on an equal profit-sharing basis with the land owner. He had 48 quintals to sell.

Chandrakanth Biradar Bannur, also of the same taluk had about 40 quintals to offer. He found rates at the mandi unattractive.

The procurement had started at 6 in the morning. It would go on till 8 at night, an official said. The exercise began on 15 December. The bonus was announced around Christmas. But even those who sold before would get it, he assured the throng.

A panel set up in the wake of shooting dal prices last year and headed by Chief Economic Adviser Arvind Subramanian had recommended direct procurement from farmers with a committee of officials ensuring this actually happens. It also advised a minimum support price of Rs 6,000 per quintal for pigeonpea. The first part of the advice had been heeded, but the procurement price fell short of recommendation. The CEA’s panel had pointed to the “social impact” of pulses, that is, their enrichment of soil with atmospheric nitrogen, and low demand on scarce water, for incentivising cultivation.

The increase in production will not compensate for the fall in prices, said D M Mannur, an agricultural scientist and project director at Raichur University’s local agricultural research station. The average cost of cultivation is Rs 4,800 a quintal, according to his calculation, excluding imputed value of family labour and farm rent. At that price, a farmer could make a profit of Rs 600 a quintal with a yield of five quintals an acre, he said. It is hardly a reward for seven to eight months of patience.

Arvind Govindrao Ghantoji said labour costs were eating into profits. He is a lawyer by training and grows pigeonpea on the side. Workers have to be ferried to farms and dropped off, so an eight-hour day gets reduced to six hours of work, for which Rs 300 each has to be paid.

Inclement weather had crimped output last year, but higher prices had more than compensated. Pigeonpea prices had ranged between Rs 15,700 and Rs 4,600 a quintal in 2015-16 in the Gulbarga mandi, the weighted average price being Rs 9,617. A little over eight lakh quintals had arrived that year. Arrivals the previous year were nearly 20 lakh quintals forcing the weighted average price to fall to Rs 4,900.

This correspondent had visited the district during July 2015 for a television series on “smart agriculture.” Sharad Tenglikar, a farmer and professor of community medicine, had blamed the grip of commission agents and traders and cartelization among dal processors for farmers losing out in good times and in bad. The agents force farmers to sell to them soon after harvest and repay loans. That is when prices rule low. Dal processors corner stocks, he said, and jack prices up during the lean season.

But Yograj, a partner in Sri Ayyanar Dhall Mills, challenged the narrative. Processing took eight days during which millers were exposed to price risk, he said. The quality of produce was not as good as it was as farmers did not care about soil health. Since there was little standardization, experience mattered in procurement. Yograj said his mill bought whole dal with an eye on producing at least 68 percent first grade split dal, which fetched a premium in the state’s Dakshina Kannada district, where there was a ready market for his “peacock” brand. Customer loyalty helped in tiding over difficult times.

Since pulses are susceptible to infestation by bruchids, Mannur suggested that they be stored in metal alloy silos and not traditional cement concrete ones. Manoj Rajan, Karnataka’s additional secretary for market reforms, and managing director of a company which provides backend support to the state’s electronic commodity markets, plans to set up a network of warehouses closer to farmers than the mandis. Standardized produce will be stored scientifically there, and farmers will be able to use warehouse receipts to obtain loans from banks. Control over produce should allow farmers to postpone sales and obtain better prices.

But that will also require the government to also fine tune trade policy. This year, imports of pulses have exceeded 6 million tonnes, against 3-4 million tonnes usually, and are still continuing. The ban on futures trading and limits on stocking, which were imposed to deal with scarcity – continue. The government has to be concerned about prices and inflation – but it should not make farmers pay for the welfare of consumers.