Wanted: A Strong Market Intelligence Cell

In a chat with BW Businessworld’s Suman K. Jha, NITI Aayog member and former director of the National Institute of Agricultural Economics and Policy Research, Ramesh Chand, discusses the pulses crisis and agricultural markets more broadly. Edited excerpts:

Could the latest crisis have been averted?
I feel the price rise in pulses was inevitable. But the quantum of the increase could have been moderated… One important source of information which is missing, and which I emphasise, is: we need a strong market intelligence cell… For example, this year in Myanmar the increase in pulses production was unprecedented, but the crop was spoiled by rain. Myanmar is our main source for some commodities. Such information… could have been used in advisories.

Would you agree that the government’s focus is on easing the supply chain, rather than boosting supply?
Our marketing system has seen no modernisation in 30-40 years. You take any other consumer good and compare the supply chain 10-20 years ago with the present system ­— you will find an efficient system. But in agriculture, because of restrictions, because of the APMC Act, that efficient supply chain is not there. For any commodity, we need an efficient supply chain. With arhar dal, the present price may be Rs 180 per kilo, but you’ll see in December, when farmers come to sell, the price will fall to Rs 100. Through an efficient supply chain, we can ensure better incentives for farmers. So it’s useful from the consumer’s and producer’s point of view.

Why are yields low? What stops framers in irrigated areas from taking advantage of high prices to grow more pulses?
Pulses are the victims of Green Revolution technology and irrigation development. When land is irrigated… the farmer finds rice or wheat more profitable. With Green Revolution technology, outbreaks of pests have increased. Cereals are not that susceptible, but pulses are. We have not come out with resistant or high-yield varieties. For long-term plans to increase pulses production, we must look at technology.

Farmers say crop prices don’t even cover costs. You disagree with the Swaminathan Commission’s recommendations, which include support pricing at cost plus 50 per cent. Why?
We need to differentiate between two situations. One is to ensure prices don’t fall below a minimum. You can call it price insurance. The second is to ensure they get a remunerative price. Price insurance requires public intervention, while remunerative prices require competitive markets. There, you can’t do much through minimum support price (MSP). The Swaminathan Commission report gave no rationale for why MSP should be cost plus 50 per cent — why not 10 or 80 per cent?
In the last two years, crops without MSPs grew faster. If the market is competitive, it will reward. MSPs don’t always ensure best price. Without MSP, it is possible that farmers get 100 per cent more than the cost.

After the Swaminathan report, I wrote a report focusing on technical aspects. For instance, should farmers’ labour be evaluated at the rate of casual or skilled labour?
Also, if MSPs are linked strictly to cost, cropping patterns would not change according to requirements. The best way to ensure remunerative prices for farmers is to have competitive markets, and we need to work towards that.

(This story was published in BW | Businessworld Issue Dated 30-11-2015)