In today’s Finshots, we tell you about rising dal prices and government actions.

The Story

The government is worried that people are manipulating the prices of dal!

See, the prices of tur dal (pigeon peas) have shot up by a whopping 31% in the past year alone. And it’s not just the tur dal that’s in distress, even urad dal (black gram) is up by nearly 15% and masur dal (red lentil) has headed north too.

And the government fears that middlemen are hoarding sacks of dal. That they’re keeping it all stocked up in warehouses or stores and curtailing supply. And naturally, a lower supply will lead to higher prices. That will feed into inflation too which does not bode well for the economy.

So to ensure this isn’t commonplace, the government wants to conduct some surprise inspections. It’ll just pop into a market or a store and see what’s happening. And it might even ask traders and retailers to disclose their stock of dals on a frequent basis.

But we have to ask — is it just unscrupulous hoarding by a select few that’s driving up the prices or is there something else that’s going on here?

Okay, let’s take it from the top.

India loves dal. Especially tur dal. It’s the most consumed variety of dal across rural and urban households. But the thing is, we don’t produce enough of it to meet our demands. And, this isn’t a new phenomenon. Farmers have long been prioritising rice and wheat over pulses. It has been going on for decades now.

For instance, the production of pulses grew by a measly 45% between 1951 to 2008. Whereas, wheat

production grew by 320%. Farmers simply didn’t want to grow a lot of pulses. And that’s in part due to the yield differential between the two crops. While each hectare of pulses yielded 800 kg of the crop, wheat yielded upwards of 3,000 kg.

And it’s not just wheat that came into favour. Farmers flocked towards the lucrative soybean too. And soon, traditionally pulse-producing states in north India began to fade into the background.

The end result?

We’ve had to import pulses since 1981. And around 10% of our annual demand comes from countries such as Tanzania, Mozambique, and Myanmar.

Now imagine a situation where the weather plays spoilsport. The monsoons don’t show up on time. And the monsoons are quite crucial because pulses typically aren’t an ‘irrigated’ crop. Farmers need the rain to show up and then vanish on time. Any variation can have a huge impact on production.

And that’s what has happened of late. The weather has been erratic. Disease has struck crop production and we’re way short of our targets.

So much so that we’ve had to introduce duty-free imports of dal in December 2023. At first, the scheme was supposed to be in place till March. But with dal production in the country still not up to the mark, the government decided to extend the scheme till June. We’re importing a lot.

And we introduced such duty-free imports a few years ago as well when we couldn’t produce enough pulses to meet the demand.

But hey, we can’t keep flip-flopping with our policies whenever it suits us, right?

And the government knows this. Also, it’s aware that the problem could get more acute in the future.

See, India is quite a protein-deficient nation. And pulses have been a go-to source of protein for the vast majority of us. Now the theory that experts put forward is that as India gets richer, or at least the disposable incomes rise, people will try to increase their intake of protein. And one big source of that will come from pulses.

Ergo, we need farmers to sow pulses or else the demand-supply mismatch could be quite huge in the future.

So to try and get farmers more interested in pulses, the government hiked the minimum support price (MSP) of pulses over the past decade. Think of the MSP as a floor price at which the government says it will buy a certain quantity of crop from the farmers. So that way, farmers know that they’ll kind of get a stable income even if market prices are depressed. And between FY14 and FY22, the MSP of pulses like tur and urad increased by nearly 47%.

So maybe we’ll need another big hike to keep farmers interested?

After all, the government is of the hope that the country will be self-sufficient in pulses by 2028. So we might need to nudge the farmers a little more to achieve that.

But to really convince farmers to take up the mantle, we might need to take one step ahead.

Remember how we told you that the yield of pulses is quite low?

Well, if you ask Siraj Hussain, a former union agriculture secretary, he’ll tell you that we need to fix this yield problem. Because Myanmar’s farmers produce double our yield. And in order to catch up, we need to adopt genetic modification of pulses.

Now that could be a tall order because we’re not big fans of GM. The debate of GM mustard itself went to the Supreme Court recently. So you can be sure that such a move will not going to happen overnight.

But hey, we might need to consider all options if we don’t want to end up importing by the boatloads again in the future and if we want to stop all this hoarding behaviour as well.

What do you think?

Until then…

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