Low on supply

To check the volatile production of pulses, the government plans to increase seed production.

The chronic demand-supply imbalance for most pulses has been continuing for over a decade now. Moreover, with rising population and income levels, domestic consumption of pulses, estimated at over 15-16 million tonnes per year, is steadily increasing.

Domestic production of pulses had touched a high of 14.9 million tonnes in 2003-04, but declined to 13.1 million tonnes in 2004-05, and to 13.4 million tonnes in 2005-06. In the current year, the production is estimated to recover to 14.5 million tonnes.

Pulses were brought within the ambit of the Technology Mission on Oilseeds in 1990. The centrally sponsored Integrated Scheme of Oilseeds, Pulses, Oilpalm and Maize (ISPPOM) is being implemented in major pulses-growing states since April 2004. Despite this, the productivity of pulses has remained stagnant, according to the Economic Survey.

The Budget 2007-08 emphasises the expansion of ISPPOM, with sharper focus on scaling up the production of breeder, foundation and certified seeds.

The government will fund the expansion of the Indian Institute of Pulses Research, Kanpur, and offer other producers a capital grant or concessional financing to double the production of certified seeds for pulses within a period of three years.

As pulses are genetically low-yielding and are grown on marginal and sub-marginal land under rain-fed conditions, the focus needs to shift to micro-irrigation, micro-nutrients, better production practices and development of high yielding seeds.

The country has relied on imports to fill the gap between domestic production and consumption. However, with overseas availability of the commodity being limited, the price volatility in pulses can be reduced by boosting domestic production.

Pulses production has remained largely unattractive to Indian farmers due to its low productivity and lack of adequate government support and a poor procurement policy.

Pulses saw a bullish trend in the beginning of last year, when chana and urad touched their historical highs of Rs 3,400 and Rs 4,000 per quintal, respectively. Chana rose by more than Rs 1,200 (from Rs 2,000 to Rs 3,200 per quintal) from January 2006 to September 2006.

Urad gained around Rs 1,000-1,200 per quintal in the same period. The trend reversed from October (after festive demand subdued) and chana declined sharply to Rs 2,000 and urad to Rs 2,700-2,800 per quintal by the end of the year.

While there were some supply side pressures in pulses, its higher prices were also attributed to futures trading. The government came under immense pressure from various political parties to check the rise in prices of essential commodities that were responsible for high inflation.

On January 23, the Forward Markets Commission, the commodity exchange regulator, directed all exchanges to de-list urad and tur from futures trading.

It was alleged that the trading in futures was responsible for the rise in prices of the commodity.

SNIPPETS

Import reliance
While the country's reliance on pulses import has been rising, the availability of the commodity in international markets is limited in quantity as well as in origin (mainly Australia, Canada, Turkey and Myanmar).

During 2005-06, 1.6 million tonnes of pulses were imported, as against 1.3 million tonnes in 2004-05. Imports during the current financial year, up to January 2007, were 1.7 million tonnes, as against 1.41 million tonnes in the corresponding period last year.

The pulses import tender floated last year by government bodies like the National Agricultural Cooperative Marketing Federation were cancelled owing to higher international prices.

The nil duty on pulses import that the government announced last June will end in August this year. But duty-free imports have had little impact on domestic prices, as the prices were high in the international market. With a view to contain the rising prices of the commodity, export of pulses was banned in June last year.

Better prospects
Due to the increase in pulses cultivation area from 133 lakh hectares to 138 lakh hectares this year, the prices turned bearish in all pulses by the end of 2006, expect tur.

Prices of tur rallied from Rs 1,900 per quintal to Rs 2,500-2,600 in both spot and futures markets during the end of December 2006. More farmers turned to cultivation of chana from oilseeds in Rajasthan and Madhya Pradesh, keeping in view the bullishness in the commodity.

According to the second advance estimates by the Ministry of Agriculture, rabi chana crop will be about 6.16 million tonnes, up 10 per cent over last year's 5.6 million tonnes.

"While chana had touched a high of Rs 3,300-3,400 per quintal last year, the prices with rabi arrivals may fall to Rs 2,000 level. At present, chana prices are ruling at Rs 2,300-2,400 per quintal," says an analyst.

Arrivals started in the first week of January from Andhra Pradesh and Maharastra, but are yet to pick up in states like Madhya Pradesh and Rajasthan.

Arrivals from these states are likely to pick up from the first week of March, and prices may remain firm till then. However, there are reports of rainfall in Rajasthan and Madhya Pradesh, which can lead to a delay in arrivals and marginal crop damage.