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Context

• In April 2024, the consumer price index for cereals was 8.63% higher than that in April 2023.
• However, the inflation in the price of roti (a staple food item made from wheat) may not have significantly hurt a majority of poor and lower middle-class Indians due to the government's flagship food security scheme.
• This scheme provides 5 kg of rice or wheat, free of cost every month, to some 813.5 million persons.

Impact on Roti Prices

• Government Food Security Scheme: The scheme has cushioned the impact of cereal price inflation on poor and lower middle-class families by providing essential grains at no cost.
• Beneficiaries: Approximately 813.5 million individuals benefit from this scheme.
• Mitigation of Inflation Impact: Despite an 8.63% increase in cereal prices, the availability of free rice and wheat has lessened the financial burden on low-income households.

Inflation in Pulses

• Pulses Inflation: The annual retail inflation for pulses was 16.84% in April 2024, nearly twice that for cereals.
• Significance: Pulses are a critical source of protein and other nutrients for Indian households.
• Public Distribution System (PDS): Unlike cereals, pulses are not widely distributed through the PDS, forcing consumers to purchase them at market prices.

Retail Prices of Pulses

• Chana (Chickpea): The average all-India modal price was Rs 85 per kg on May 23, up from Rs 70 a year ago.
• Arhar/Tur (Pigeon Pea): The price increased from Rs 120 to Rs 160 per kg.
• Urad (Black Gram): The price rose from Rs 110 to Rs 120 per kg.
• Moong (Green Gram): The price also increased from Rs 110 to Rs 120 per kg.
• Masoor (Red Lentil): The price slightly decreased from Rs 95 to Rs 90 per kg.

Implications for Low-Income Households

• Increased Burden: The significant rise in prices of commonly consumed pulses has likely put additional financial pressure on low-income households.
• Limited Access: Due to the lack of inclusion in the PDS, families must purchase pulses at higher market rates, exacerbating the impact of inflation.
• Nutritional Concerns: Given that pulses are a major protein source, the increased prices may affect the dietary intake and nutrition of poor and lower middle-class families.

Reasons for Rising Dal Prices

El Niño-Induced Patchy Monsoon and Winter Rain

• Weather Impact: The primary cause of the surge in dal prices is the El Niño-induced irregular monsoon and insufficient winter rains.
• Production Decline: These weather conditions led to a reduction in domestic pulses production:
• 2021-22: 27.30 million tonnes (mt)
• 2022-23: 26.06 mt
• 2023-24: 23.44 mt

Specific Pulses Affected

• Chana (Chickpea):
• Production dropped from 13.54 mt in 2021-22 to 12.27 mt in 2022-23, and further to 12.16 mt in 2023-24.
• Trade sources estimate this year's production to be even lower, at less than 10 mt.
• Arhar/Tur (Pigeon Pea):
• Production fell from 4.22 mt in 2021-22 to 3.31 mt in 2022-23, and slightly increased to 3.34 mt in 2023-24.
• Trade sources project this year’s output to be below 3 mt.

Regional Production Issues

• Affected States: The most significant production shortfalls occurred in Karnataka, Maharashtra, Andhra Pradesh, and Telangana.
• Reasons: Farmers in these states planted less area due to irregular and deficient rainfall.

Market Prices

• Current Trading Prices:
• Chana: Averaging Rs 6,500 per quintal in Latur, Maharashtra.
• Arhar/Tur: Averaging Rs 12,000 per quintal in Kalaburagi, Karnataka.
• Minimum Support Prices (MSP):
• Chana MSP: Rs 5,440 per quintal.
• Arhar/Tur MSP: Rs 7,000 per quintal.
• Harvest Season Prices:
• Chana: Ranged from Rs 5,700 to Rs 5,800 per quintal during March-April.
• Arhar/Tur: Ranged from Rs 9,500 to Rs 10,300 per quintal during January-February.

Surge in Imports

Increase in Pulses Imports

• Record High Imports: In the fiscal year 2023-24 (April-March), India's pulses imports reached a value of $3.75 billion, the highest since 2015-16 and 2016-17, when imports were valued at $3.90 billion and $4.24 billion respectively.
• Import Quantities: Major pulses imports totaled 4.54 million tonnes (mt) in 2023-24, significantly higher than 2.37 mt and 2.52 mt in the preceding two fiscal years.
• Historical Comparison: While substantial, these figures remain below the all-time highs of 5.58 mt, 6.36 mt, and 5.41 mt recorded in 2015-16, 2016-17, and 2017-18 respectively.

Reversal of Self-Sufficiency

• Previous Self-Sufficiency: From 2015-16 to 2021-22, India achieved relative self-sufficiency in pulses, with domestic production rising from 16.32 mt to 27.30 mt.
• Government Policies: This increase was driven by several policy measures:
• MSP-Based Procurement: Minimum Support Price (MSP) procurement incentivized farmers to grow pulses.
• Import Duties: The imposition of duties significantly reduced imports, particularly of yellow/white peas (matar) and chana, by 2022-23.

Agricultural Innovations

• Short-Duration Varieties: The development of short-duration chana and moong varieties further boosted domestic production.
  • Chana and Moong Cultivation: These varieties can be cultivated with minimal irrigation, utilizing residual soil moisture from previous crops.
  • Multiple Crops: The introduction of 50-75 day moong varieties enabled farmers to plant up to four crops a year—kharif (post-monsoon), rabi (winter), spring, and summer.

Inflation, El Niño, and Elections

Government Measures to Tackle Inflation

• Removal of Tariffs and Quantitative Restrictions (QRs):
• Arhar/Tur and Urad & Moong: On May 15, 2021, the Narendra Modi government lifted the annual QRs of 0.2 mt on arhar/tur and 0.3 mt on urad & moong imports, along with a 10% basic customs duty.
• Masoor (Lentils): On July 26, 2021, the import duty on masoor was reduced from 10% to nil.
• Yellow/White Peas: Previously subject to a 0.1 mt yearly QR, a 50% duty, and a minimum price of Rs 200/kg, all restrictions were removed on December 8, 2023.
• Desi (Small-Sized) Chana: The 60% import duty was abolished on May 3, 2024.
• Moong: The import restriction on moong was reinstated on February 11, 2022.

Impact of Policy Changes

• Increased Imports: The relaxation of tariffs and QRs led to a significant rise in pulse imports.
• Masoor: Imports from Australia and Canada reached a record 1.7 mt in 2023-24.
• Yellow/White Peas: Imports surged to 1.2 mt from virtually nothing, with supplies coming from Canada, Russia, and Turkey.
• Chana: Imports increased despite the duty abolition only occurring recently, with major sources being Tanzania, Sudan, and Australia.

Flat or Declining Imports

• Arhar/Tur: Imports from Mozambique, Tanzania, Malawi, and Myanmar remained flat or declined.
• Urad: Imports, mainly from Myanmar, also showed little change or a decrease.

Electoral and Climatic Pressures

• El Niño Effect: The weather-induced production shortfall necessitated increased imports to stabilize domestic supply and prices.
• Electoral Considerations: With elections approaching, the government was motivated to check rising dal prices to avoid public discontent.

Closing Remarks

Dependence on the Southwest Monsoon

• Monsoon Influence: Future dal inflation will be significantly influenced by the performance of the southwest monsoon.
• Climate Predictions: Global climate models indicate that El Niño may transition to a “neutral” phase next month and possibly to La Niña — which typically brings good rainfall to the Indian subcontinent — by the second half of the monsoon season (June-September).

Domestic Supply Challenges

• Chana Procurement: Government agencies have procured minimal quantities from this year’s chana crop, in stark contrast to the 2.13 mt procured in 2023 and 2.11 mt in 2022.
• Supply Shortfall: The weak domestic supply position, coupled with monsoon uncertainties, suggests that higher imports will be necessary to meet demand.

Government Actions and Import Policies

• Duty-Free Import Permissions: The government has allowed duty-free imports of arhar/tur, urad, masoor, and desi chana until March 31, 2025.
• Extension for Peas: The duty-free import permission for yellow/white peas, currently valid until October 31, 2024, may need to be extended.

Import Trends and Substitutions

• Cheaper Substitutes:
• Yellow/White Peas: These are being imported at Rs 40-41/kg and serve as a cheaper alternative to chana.
• Masoor Dal: This is increasingly being used as a substitute for arhar/tur in dishes like sambar in many restaurants and canteens.
• Import Sources and Likely Increases:
• Higher Imports Expected: Imports of yellow/white peas and masoor, primarily from Canada, Australia, and Russia, are likely to increase more than those of arhar/tur and urad from East Africa and Myanmar.

Conclusion

• The outlook for dal inflation is closely tied to the upcoming southwest monsoon season.
• While there is hope for improved rainfall due to potential La Niña conditions, the current precarious domestic supply situation necessitates continued reliance on imports.
• The government has already taken steps to facilitate these imports, extending duty-free permissions for several key pulses.
• Additionally, the shift towards cheaper substitutes like yellow/white peas and masoor dal is expected to continue, helping to mitigate the impact of inflation on consumers.
• Ensuring stable prices and adequate supply will require careful monitoring of both domestic production and global import trends in the months ahead.

PRACTICE QUESTION Q. Discuss the importance of achieving self-sufficiency in India's dal and cereal sectors. Highlight the challenges and propose policy measures for enhancing domestic production and ensuring food security.

SOURCE: THE INDIAN EXPRESS