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Columns - Commodity Commentary
Pulses production set to touch Govt target
Mumbai, Jan. 6
For the first time in recent years, pulses production (2010-11) is set to hit the target fixed by the Government. After the harvest of a record 60 lakh tonnes in the kharif season, prospects for pulses production in the upcoming rabi harvest look bright.
According to the latest available estimate, acreage under rabi pulses is at a new high of 133 lakh hectares, up from 127 lakh hectares last year.
Gram (chana), lentil, peas, urad and moong are the major rabi season pulses. The area under gram in particular has gone up by nearly 6 lakh hectares this season.
The pulses production target set for this season is 108 lakh tonnes and on current reckoning it looks achievable. In the event, total pulses output in 2010-11 would reach a new high of 168 lakh tonnes. Improved domestic supplies are sure to exert their effect on market prices.
We have already seen the effect of higher kharif season production on open market pulses prices which has corrected down by 20 to 30 per cent in the last three months. If anything, rabi season accounts for over 60 per cent of the domestic pulses production. So, rabi harvest and further improvement in availability should under normal circumstances exert downward pressure on domestic pulses prices.
Without doubt, demand side is robust. With rising incomes, especially in rural areas (higher minimum support price across crops, NREGA scheme, huge infrastructure spending, food-for-work programmes, welfare schemes and so on), the demand for pulses is expanding.
Demand for pulses is income elastic and price elastic. Rising incomes spur demand, so do lower prices. Also, demand for pulses is supplementary in nature.
More pulses will be consumed with higher consumption of fine cereals, wheat and rice. So, we have a healthy situation where consumption of pulses is rising at a fast clip driven by rising incomes, rising fine cereal consumption and relatively friendly prices.
It would be naïve to look at per capita availability to draw any conclusion about pulses consumption.
If anything, the per capita number masks the reality. At present, per capita availability of pulses is arrived at by dividing total availability (domestic production plus imports) by the population number. It works out to approximately 15 kilogramme for a person a year.
Nutritionists recommend at least 20 kg for a person per year. So, we are way off the minimum nutritional needs. On current reckoning, we are years away from achieving the target.
Many analysts mistake per capita availability for per capita consumption. They often overlook the massive skew in pulses consumption. The top 30 per cent of the population earning high incomes actually consumes well over 20 kg per capita, while the bottom 30 per cent representing the poor and needy, gets to consume perhaps 7-8 kg per capita.
This skew needs to be corrected. Poor people who are actually in need of protein should be able to access pulses at affordable prices.
However, the Government's approach has so far been one of benign neglect.
In this context, a recent Assocham study that talks of a shortfall of 8 million tonnes pulses during the current year needs a thorough review for removal of inaccuracies. The report got the numbers wrong.
Importantly, the world pulses market is fully aware of developments in India, especially the rebound in crop production.
World pulses prices have actually declined from levels traded 6-8 months ago. So, an alarmist approach to pulses prices is unwarranted.
Global food prices
It must also be mentioned that in the last two months, world food prices have sharply moved up for a variety of reasons including adverse weather (for example effect of La Nina in South America) and renewed role of speculative funds in the bourses.
A rising tide lifts all boats. There will be some rub-off effect on pulses, too.
However, in the context of a rebound in domestic production in 2010-11, supplies are reasonably satisfactory and the upside price risks are not as high as feared.
From June 2011, behaviour of southwest monsoon will have a bearing on pulses market.
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