India must regulate State enterprises in pulses trade.

ndia was the centre of attraction and subject of debate at the just concluded annual World Pulses Conference organised by CICILS/IPTIC (International Pulses Trade and Industry Confederation) here. It was least surprising not so much because of a large Indian presence, but because India holds the rather dubious distinction of being the world's largest producer, importer and consumer of pulses; and the situation is most unlikely to change anytime soon.

Exporters happy

Major producer-exporters Australia, Canada, the US and Turkey are keen to decipher what's going on in the sub-continent. Exporting countries are happy because India's import volumes have been surging in recent years, and the country has been able to support overseas pulses growers admirably; but has miserably failed to contain domestic prices.

Importantly, among participants from India and a large number of persons of Indian origin working in trading centre such as Singapore, one could sense palpable anger at the way India's state trading enterprises (STC, MMTC, PEC and Nafed) have been conducting their pulses import and distribution business.

Faulty policies

There are complaints that the state enterprises' faulty policies and procedures relating to floating of tenders, purchases, inventory build up and domestic sales have actually distorted the normal working of the pulses market.

Instead of delivering any real relief to domestic consumers, the working style of the public sector corporations have actually helped overseas pulses growers and suppliers enjoy substantial profits, traders alleged.

One also heard hush-hush talks of corrupt practices by state enterprise officials.

The complaints of the private trade cannot be brushed aside as those of some disgruntled elements in the trade.

A closer scrutiny of the state enterprises' working insofar as pulses imports and distribution are concerned is sure to reveal gross inefficiencies in terms of timing of issuing tenders, desirability of tendering for a particular variety of pulses, the pricing mechanism itself and of course the manner of disposal in the domestic market.

Their functioning has left much to be desired. The objective of controlling galloping pulses prices is far from achieved.

Rising prices

On the other hand, if investigated objectively, it may come as no surprise that these Government parastatals may have actually contributed to a rise in pulses prices rather than the other way round.

A simple example of their domestic sale policy may be revealing. Some of the public sector corporations, instead of readily disposing of the imported stocks in the open market, actually hold back such stocks in the warehouses which trigger a price rise.

When sold, they set the minimum sale quantity at very high levels – say, 300 tonnes or 500 tonnes per trader equivalent to over Rs 1 crore – which effectively keeps out small traders; but puts the stocks sold in the hands of a few large and financially strong buyers.

The outcome is not inconceivable.

There is simply no reason why imported pulses should not be sold to all traders with minimum order of 10 tonnes (that is a lorry load). This will prevent concentration in sale and wide dispersal of imported pulses among a large number of small traders, which in turn will have salutary impact on prices.

Not serious about disposal

The problem is that there is no one within the Government who is serious about pulses import and disposal by public sector companies.

Most corporations (STC, MMTC, PEC) are under the administrative control of the Commerce Ministry, while NAFED is answerable to the Agriculture Ministry.

But the responsibility to augment availability through imports and ensure uninterrupted supplies of this essential food item is with the Food and Consumer Affairs Ministry.

There is hardly any coordinated approach to optimise the import business and derive price advantage and welfare benefits.

In the past too, Business Line has argued for regulating the working of the state enterprises in the pulses business on the basis of transparent guidelines.

The subsidy that these enterprises enjoy may be an avoidable waste.

Source : Business Line