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Electronic spot exchanges to help government bring agriculture price stability

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Cropping decisions continue to be driven by price-adaptive behaviour of Indian farmers. Such decision-making manifests as the most remunerative crop in the last season being sown over larger acreage in the current season, leading to an inevitable price crash. Pulses prices reigning high two years ago is still fresh in the minds of the farmers, leading to record output amid prices of pigeon pea and chickpea ruling significantly below their support prices for most of the year so far. As per the fourth advance estimates for 2017-18, cereal-output is at an all-time high of 259.59 million tons (mt), up from 251.98 mt and 235.22 mt in the previous two years, and pulses are at 25.23 mt as against 23.13 mt and 16.35 mt. The supply glut in the pulses market, during 2017, severely eroded prices, with massive deflation of 24.6% (by July-August) in prices. Monsoon 2018 may lead to another year of bumper crop output, and may derail any recovery hopes that exist for pulse growers.

Against this backdrop, the government disrupting the conspicuous bumper production-price drop cycle through consistent higher support prices is worth examining. The government has taken various measures to prevent the drop in prices. Import duties have been hiked for chickpea, pigeonpea and other lentils apart from quantitative caps on imports. Import duties on edible oil have been hiked four times in the past ten months against a plunge in the last kharif season, and the impact is visible on oilseed prices. Just after the hike in duty, soybean prices have rallied by more than 30% while groundnut prices also recovered, despite pick up in their production estimated 23% higher over last year’s 74.62........

© The Financial Express