Incentives for pulse production
Source: Flickr, Lindsey Nicholson
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Pulses are an important source of complex carbohydrates and fiber in the Indian diet. Pulse production also has environmental benefits, given that it has the lowest carbon footprint and improves soil health, reducing the need for nitrogen fertilizer. The price of pulses greatly affects the budgets of Indian households, although they represent between 6 and 7 percent of their budget on them, pulses account for more than 40 percent of food price inflation. A combination of increased demand as well as relatively stagnant production is to blame as pulse production has hovered around 18 million tonnes since 2014.

A constant increase of their prices and the slow decline of their proportional consumption and relative production has become a cause of concern of policy makers. Researchers of IFPRI released a study analyzing possible policy measures to lower the cost of pulses. The authors consider minimum support prices, access to protective irrigation sources, and research and extension.

The research proves that producers tend not to respond to small price increases, given that the production of pulses is very sensitive to drought. Pulses tend to grow in areas without artificial irrigation and depend on the monsoon for sufficient water. Producers tend to switch towards cereal production when irrigation is made available, because of higher yield and pay. For example, according to Directorate of Economics and Statistics, chickpea area allocation has decreased more than 50 percent between 2001 and 2010 in the northern states of Haryana, Himachal Pradesh, Punjab and Uttar Pradesh, where irrigation is more widespread. In all of India, between 2013 and 2015, the area allocation for chickpeas has decreased almost 17 per cent, and for pigeon pea, this number is almost 2 per cent. In India, the private sector is heavily involved in the trade of seeds and extension services for maize, sorghum and millet, but not so for pulses. This lack of support also influences greatly the behavior of the producers.

The first option to increase domestic supply would be to increase imports. Already India imports close to 5 million tonnes of pulses per year, but the evidence shows that the entry of foreign goods has not decreased the price but rather stymied further increases. However, few countries in the world that can meet the size of India’s demand for pulses, thus, the possibility of expanding the dependency on imports is very limited, requires additional trade agreements, and subjects them to negative production shocks from every exporting country.

Another option is to provide support for the consumer with subsidies. However, the implementation of this policy has only showed marginal increases of household consumption of pulses and negligible improvement of nutrition. However, even if the policy was to give a sufficient amount of pulses to improve nutritional outcomes to each household, there is not enough pulse production available. Therefore, the solution has to come from producing more pulses.

One measure implemented to encourage the production has been to the raise of the minimum support price. Setting guaranteed prices beforehand is expected to act as an incentive to increase the sowing areas and investment in the production. However, even if increases have been substantial, they still come short to fulfilling the needs because even at the set minimum price, the demand is still larger than the proposed supply. Therefore, minimum prices aid traders more than producers, because it incentivizes collusion at prices below market prices.

From the market standpoint, certain imperfections also allow for distortions in price transmission. High transactional costs for landholders’ small surpluses create a disincentive to produce pulses. A solution for this issue could be facilitating the aggregation of these small surpluses among several farmers. Several Farmer Producer Organizations exist, but their performance has been of mixed results. Another intervention that has proved to lower costs is to limit taxes such as the agricultural produce market committee tax for pulses.

The authors note that a useful intervention will be to invest in research to increase the production margins intensively (through yield) and extensively (sown area). Identifying best practices, such as investing in the promotion of seed value chains as well as making the existing seed markets more efficient. Research and development of drought-resistant seeds and elaboration of crop rotation schemes with rice and wheat could be an effective way of increasing production. Data from the Ministry of Agriculture shows that there’s still a yield gap to fulfill, with a realized yield for chickpeas and pigeon peas falling 40 to 100 percent short of its potential because in part to low seed replacement.

Finally, although protective irrigation has caused farmers to switch from pulses to cereals, if a provision clause was included to prioritize pulse-growing areas, pulse production would be incentivized. Growing pulses as a second crop during rice fallows could also prove to be beneficial for the small farmer.

Written by Florencia Paz.

Photo credit:Flickr, Lindsey Nicholson