Pulses

Production, Markets and Trade:
A Detailed Analysis of
Factors Affecting
Pulses Production in India
Poornima Varma
Centre for Management in Agriculture

Indian Institute of Management Ahmedabad
Ahmedabad-380015
Supported by
Ministry of Agriculture and Farmers Welfare, Government of India
March 2019
Final Report
Production, Markets and Trade:

A Detailed Analysis of Factors
Affecting Pulses Production
in India
Poornima Varma
Centre for Management in Agriculture

Indian Institute of Management Ahmedabad
Ahmedabad-380015
Supported by
Ministry of Agriculture and Farmers Welfare, Government of India
March 2019
PRODUCTION, MARKETS AND TRADE: A DETAILED ANALYSIS OF FACTORS AFFECTING PULSES PRODUCTION IN INDIA i
Acknowledgements
This study would not have been possible without the generous help and support of several
individuals and institutions. I would like to express my sincere gratitude to the Ministry
of Agriculture, Government of India, for financial support in undertaking this study. My
deepest gratitude goes to Prof. Sukhpal Singh, Chairperson of CMA, for his invaluable
encouragement and support that I have always received. My special thanks to Prof.
Vasant P. Gandhi, former Chairperson, CMA for his encouragement, support and valuable
comments throughout the period of this study. I would like to also thank Prof. Vijay Paul
Sharma, Chairman, CACP for some of his valuable suggestions and comments during the
initial stages of this study. My thanks to Prof. Ranjan Ghosh for his timely and valuable
inputs and suggestions without which this study wouldn’t have been possible. I also thank
Dr. C.S.C Sekhar, IEG, for his valuable comments and suggestions that helped in enriching
this study.
My study benefited a lot from the support of PRADAN in conducting the field work in
Madhya Pradesh. I record my deepest gratitude to PRADAN, for their support in data
collection from Narsinghpur district of Madhya Pradesh. My sincere gratitude also goes to
Maruti Manpade, State Vice President - Karnataka Pranth Raith Sangh, Gauramma and all
the members of All India Kisan Sabha (AIKS) who helped me in organizing the meetings
and discussions with farmers in Gulbarga, Karnataka.
My sincere gratitude also goes to the officers of the Department of Agriculture, Gubarga
and Nagpur. I would like to extend my sincere gratitude to Kamalnayan Jamnalal Bajaj
Foundation of Wardha especially Raju Petkar in coordinating farmers meeting in Wardha
and also in collection of the data. I would like to also thank his team members for their
valuable contribution. I would like to extend my gratitude to Viral of IIMA library for
being very proactive in sending the materials and arranging the data. Thanks are also
due to CMA staff -Mini, Dipali and Viji for their enthusiastic help in each and every stage
of this study. I would like to also thank Ashutosh for helping me with some of the data
PRODUCTION, MARKETS AND TRADE: A DETAILED ANALYSIS OF FACTORS AFFECTING PULSES PRODUCTION IN INDIA iii
collection and compilation. Akash also helped me in obtaining the monthly import data
from DGIC & through IIMA library.
I would like to extend my special acknowledgement to Nikita Pandey for her invaluable
contribution to this study. This study would not have materialised without her enthusiastic
efforts in collecting the data from the library and the field, assistance in writing and data
analysis. My special thanks also go to Raja Mohanty for his invaluable help and support in
analysing the data. Sonali Kaur Bhatia deserves special acknowledgment for her invaluable
contribution in the writing of research proposal, analysis of data as well as field visit to
Wardha and Gulbarga for collecting the data. I would like to also thank Nicky Johnson
for all his timely support. I owe a lot to Anar and Jannet for their valuable contribution to
supply response analysis.
Needless to mention while I owe a lot to the numerous individuals who contributed
significantly to the conduct of this study, the data analysis and the views expressed in this
report and any omissions or errors that remain in the report are entirely mine.
Poornima Varma
iv PRODUCTION, MARKETS AND TRADE: A DETAILED ANALYSIS OF FACTORS AFFECTING PULSES PRODUCTION IN INDIA
Contents
- Acknowledgements iii
- Contents v
- List of Tables vii
- List of Figures ix
- Executive Summary xi
Chapter 1 Introduction 1
Key Issues: Production Uncertainty and High Import Dependency Objectives,
Study Area, Data Collection and Methodology
Chapter Scheme
Chapter 2 An Overview of Pulses Economy 7
Introduction
Conclusion
Chapter 3 Pulses Production and Food security 21
Introduction
Consumption of Pulses
Production Technologies
The Need for Sustainable Practices
Chapter 4 National Food Security Mission and Pulses Production 31

Introduction
NFSM-Pulses Districts
Major Interventions
NFSM in Maharashtra
NFSM in Karnataka
NFSM in Madhya Pradesh
Chapter 5 Socio-Economic Profile of the Sample Households 41
Introduction
An Overview of Selected Study Areas
Socio-Economic Profile - an Overview
Socio-Economic Profile - District-Wise
Conclusion
PRODUCTION, MARKETS AND TRADE: A DETAILED ANALYSIS OF FACTORS AFFECTING PULSES PRODUCTION IN INDIA v
Chapter 6 Pulses Production, Trade and Government Policies 55
Country Wise Imports of Major Pulses
Tariff Scenario
Conclusion
Chapter 7 Pricing and Exchange Rate Pass-through in Pulses Imports 69
Introduction
The concept of Pricing to Market and Exchange Rate Pass Through
Review of Literature and Theoretical Framework of the Study Model
Specification
Data Description
Results and Discussion
Conclusion
Appendix
Chapter 8 Minimum Support Price Policies 89

An Overview of Government interventions in Agriculture
Minimum Support Prices Scheme
Procurement Policy and operations
E-NAM
Conclusion
Chapter 9 Information and Utilisation of MSP: Major Determinants 105
Introduction
Conceptual Framework
Model Specification
Description of Dependent and Explanatory Variables
Conclusion
Chapter 10 Supply Response of Major Pulses 113
Introduction
Data
Conclusion
Chapter 11 Conclusion and Policy Implications 119
- References 125
vi PRODUCTION, MARKETS AND TRADE: A DETAILED ANALYSIS OF FACTORS AFFECTING PULSES PRODUCTION IN INDIA
List of Tables
Table Title of the Table Page

Chapter 2: An Overview of Pulses Economy 7
2.1 Share of Major Pulses Producing States Area in Total Area 11
2.2 Share of Major Chickpea Producing States Area in Total Area in India 12
2.3 Share of Major Pigeon Pea Producing States in Total Area under Pigeon Pea in India 13
2.4 Production Share by Major Pulses Producing States 15
2.5 Share of Major Pigeon Pea Producing States’ Production in Total Production 16
2.6 Share of Major Chickpea Producing States’ Production in Total Production 17
Chapter 3: Pulses Production and Food security 21
3.1 Nutritional Content of Major Pulses in India 22
Developing Countries where Pulses Contribute more than 10% of Per Capita Total Protein
3.2 23
Intake
3.3 Promising Intercropping for Different Pulse Producing States 25
Chapter 4: National Food Security Mission and Pulses Production 31
4.1 Districts Covered (Identified) Under National Food Security Mission (2017-18) 33
4.2 Districts Covered under NFSM-Pulses in the Study States 34
4.3 Area, Production and Yield of Pulses in NFSM District - Yavatmal 36
4.4 Area, Production and Yield of Pulses in Non-NFSM District - Dhule 36
4.5 Area, Production and Yield of Pulses in NFSM District - Chitradurga 37
4.6 Area, Production and Yield of Pulses in Non-NFSM District - Mandya 37
4.7 Area, Production and Yield of Pulses in NFSM District - Dewas 37
4.8 Area, Production and Yield of Pulses in NFSM District - Dindori 38
4.9 Action Plan for Implementation of NFSM-Pulses in all States During 2017-18 38
Chapter 5: Socio-Economic Profile of the Sample Households 41
5.1 Households According to Type 42
5.2 Percentage of Households According to Farm Size in Different States 43
Chapter 7: Pricing and Exchange Rate Pass-through in Pulses Imports 69
7.1 Results of the PTM Model for Kidney Beans - Commodity Specific Exchange Rate Model 80
7.2 Results of the PTM Model for Peas - Commodity Specific Exchange Rate Model 80
PRODUCTION, MARKETS AND TRADE: A DETAILED ANALYSIS OF FACTORS AFFECTING PULSES PRODUCTION IN INDIA vii
Table Title of the Table Page
7.3 Results of the PTM Model for Chickpea - Nominal Exchange Rate Model 81
7.4 Results of the PTM Model for Pigeon Pea - Nominal Exchange Rate Model (old currency) 81
7.5 Results of the PTM Model for Pigeon Pea - Nominal Exchange Rate Model (new currency) 82
A7.1 Results of the PTM Model for Pigeon Pea - Real Exchange Rate Model (new currency) 83
Results of the PTM Model for Pigeon Pea - Commodity Specific Exchange Rate Model (new
A7.2 83
currency)
A7.3 Results of the PTM Model for Kidney Beans - Nominal Exchange Rate Model 84
A7.4 Results of the PTM Model for Kidney Beans - Real Exchange Rate Model 84
A7.5 Results of the PTM Model For Peas - Nominal Exchange Rate Model 85
A7.6 Results of the PTM Model For Peas - Real Exchange Rate Model 85
A7.7 Results of the PTM Model for Chickpea - Real Exchange Rate Model 86
A7.8 Results of the PTM Model for Chickpea - Commodity Specific Exchange Rate Model 86
A7.9 Results of the PTM Model for Pigeon Pea - Real Exchange Rate Model (old currency) 87
Results of the PTM Model for Pigeon Pea - Commodity Specific Exchange Rate Model (old
A7.10 87
currency)
Chapter 8: Minimum Support Price Policies 89
8.1 Minimum Support Prices of Various Pulses 93
8.2 Awareness about Minimum Support Price (MSP) 94
8.3 Procurement of Pulses under PDS by NAFED 96
8.4 Procurement of Kharif Pulses During 2016-17 96
Chapter 9: Information and Utilisation of MSP: Major Determinants 105
9.1 Variable Description 108
9.2 Descriptive Statistics for Variables used in the Model 109
9.3 Results for MSP 109
Chapter 10: Supply Response of Major Pulses 113
10.1 Descriptive Statistics for Variables used in the Model 115
10.2 Variable Definitions 116
10.3 Supply Response Regression Results for Chickpea 116
10.4 Supply Response Regression Results for Pigeon Pea 117
viii PRODUCTION, MARKETS AND TRADE: A DETAILED ANALYSIS OF FACTORS AFFECTING PULSES PRODUCTION IN INDIA
List of Figures
Figure Title of the Figure Page

Chapter 2: An Overview of Pulses Economy 7
2.1 Area under Production of Pulses in Thousand Hactors 7
2.2 Area under Indian Pulses as Percentage of World Area under Pulses 8
2.3 The Trends in Production of Pulses 9
2.4 Production of Indian Pulses as Percentage of World Production of Pulses 9
2.5 Yield of Pulses in Hg/Ha 10
2.6 Total Area under Pulses Production in India, State-wise 11
2.7 Area under Chickpea in India in Major Producing States 12
2.8 Area under Pigeon Pea in India in Major Producing States 13
2.9 Area under Kidney Beans in Major Producing States of India 14
2.10 Area under Peas in Major Producing States of India 14
2.11 Production of Pulses in Major Producing States 15
2.12 Production of Pigeon Pea in Major Producing States 16
2.13 Production of Chickpea in Major Producing States 17
2.14 Production of Peas in Major Producing States 18
2.15 Production of Kidney Beans in Major Producing States 18
Chapter 3: Pulses Production and Food security 21
3.1 The Per Capita Net Availability of Pulses in India 22
Chapter 4: National Food Security Mission and Pulses Production 31
4.1 States Covered by NFSM for Pulses 32
Chapter 5: Socio-Economic Profile of the Sample Households 41
5.1 Percentage of Households with Farming as Main Occupation 42
5.2 Households According to Farm Size 43
5.3 Percentage Share of Households with Awareness in any Government Schemes 44
5.4 Households with Government Scheme Awareness According to Farm Size 44
5.5 Crop Diversification State Wise 45
5.6 Crop Diversification According to Farm Size 45
5.7 Percentage of Farmers with Knowledge about New Production Techniques 46
PRODUCTION, MARKETS AND TRADE: A DETAILED ANALYSIS OF FACTORS AFFECTING PULSES PRODUCTION IN INDIA ix
Figure Title of the Figure Page
5.8 Farm Size Wise Knowledge about New Production Techniques 46
5.9 Percentage of Households with Contact with Government Extension Services 47
5.10 Farm Size Wise Contact with Government Extension Services 48
5.11 Percentage of Households with Access to Training 48
5.12 Training Received by Farm Size Wise 49
5.13 Percentage Share of Households with Information about MSP, State Wise 50
5.14 Farm Size Wise Information about MSP 50
5.15 Percentage Share of Households with Utilisation of MSP, State Wise 51
5.16 Utilisation of MSP Farm Size Wise 52
Chapter 6: Pulses Production, Trade and Government Policies 55
6.1 India’s Import of Pulses 56
6.2 India’s Share in Total World Import of Pulses 56
6.3 Trends in Imports of Peas (dry) 57
6.4 India’s Peas (dry) Import as a Percent of Total World Import 58
6.5 Trends in Imports of Chickpea 58
6.6 India’s Chickpea Import as a Percent of Total World Import 59
6.7 Trends in India’s Imports of Lentils 59
6.8 India’s Import of Lentils as a Percent of Total World Import 60
6.9 Import of Chickpea from Australia 61
6.10 Import of Chickpea from Canada 61
6.11 Import Chickpea from Ethiopia 62
6.12 Imports of Peas from Major Importers 63
6.13 Imports of Kidney Beans from Major Importers 64
6.14 Imports of Pigeon Pea (Tur) from Major Importers 64
6.15 Yearly Average Prices (Rs. per Kg) of Chickepea imported by Major Importers 65
6.16 Yearly Average Prices (Rs. per Kg) of Peas imported by Major Importers 65
6.17 Yearly Average Prices (Rs. per Kg) of Kidney Beans Imported by Major Importers 66
6.18 Yearly Average Prices (Rs. per Kg) of Pigeon Pea (Tur) Imported by Major Importers 66
Chapter 8: Minimum Support Price Policies 89
8.1 Marketable Surplus Ratio – Tur (Arhar) 97
8.2 Marketable Surplus Ratio – Gram 97
8.3 e-NAM Working Model 99
A8.1 Wholesale Price vis-à-vis MSP – Tur (Arhar) 100
A8.2 Wholesale Price vis-à-vis MSP – Urad 100
A8.3 Wholesale Price vis-à-vis MSP – Moong 101
A8.4 Wholesale Price vis-à-vis MSP – Gram 101
A8.5 Wholesale Price vis-à-vis MSP – Masoor 102
A8.6 Wholesale Prices all Zones – Tur (Arhar) 102
A8.7 Wholesale Prices all Zones – Gram 103
x PRODUCTION, MARKETS AND TRADE: A DETAILED ANALYSIS OF FACTORS AFFECTING PULSES PRODUCTION IN INDIA
Executive Summary
Pulses play a pivotal role in a country like India for all categories of people due to its
rich protein content. The protein content in pulses are double the protein content of
wheat and three times more than that of rice. Pulses are mostly cultivated under rainfed
conditions and do not require intensive irrigation facility and this is the reason why pulses
are grown in areas left after satisfying the demand for cereals/cash crops. Apart from
its rich protein content, pluses possess several other qualities such as they improve soil
fertility and physical structure, fit in mixed/inter-cropping system, crop rotations and dry
farming and provide green pods for vegetable and nutritious fodder for cattle as well.
Although, being the largest pulse crop cultivating country in the world, pulses share to
total food grain production is only 6-7% in the country. As a result, the production of
pulses was not commensurate with the demand. The excess demand is primarily due to
the stagnation in productivity which is further accelerated by the decline in area under
cultivation. As a result, the per capita net availability of pulses in the country declined
sharply over the years. The persistent deficit and the soaring pulses domestic prices made
it inevitable for the country to import pulses. Despite of being the second largest producer
of pulses, the dependency on imported pulses continues to grow in the country.
Against this backdrop, the present research examines the factors affecting the production
of pulses (chickpea and pigeon pea), the impact of government policies such as MSP and
NFSM on pulses production, the factors influencing the farmers access and utilisation
of MSP and the pricing behavior of pulses importers, exchange rate pass-through and its
implications.
This study has been divided into 11 chapters including introduction and conclusion.
Chapter 1 as an introduction provided the background, objectives, data, and methodology
along with chapter scheme. Chapter 2 gave an overview of pulses economy. Chapter 3
discussed the importance of pulses for nutritional and food security, the importance of
PRODUCTION, MARKETS AND TRADE: A DETAILED ANALYSIS OF FACTORS AFFECTING PULSES PRODUCTION IN INDIA xi
sustainable production practices to improve the pulses productivity and food security
with an emphasis on India. Chapter 4 discussed the salient features of Government of
India’s National Food Security Mission (NFSM) and its objectives especially in the context
of pulses production. Chapter 5 provided a detailed discussion of socio-economic profile
of the sample households. Chapter 6 provided an overview of pulses production, trade
and government policies with a special focus on the trends in trade and its implications.
Chapter 7 analysed the import pricing behavior and exchange rate pass through into prices
of imported pulses. Chapter 8 provided an overview of an evolution of minimum support
price policies and MSP for major pulses. Chapter 9 analysed the factors influencing the
access to information regarding MSP and utilisation of MSP in a joint framework. Chapter
10 made an analysis of factors influencing the supply response of chickpea and pigeon
pea with a special emphasis on MSP and NFSM. Chapter 11 provided the conclusion and
policy implications of the study.
The detailed household level survey was conducted for 3 major pulses-producing states.
They are Karnataka, Maharashtra and Madhya Pradesh. From each state, one of the major
pulses producing district was selected for further analysis. From Karnataka, Gulbarga
was selected, from Maharashtra, Wardha was selected, and from Madhya Pradesh,
Narsinghpur was selected.
Primary data was collected through a comprehensive household survey in the above
mentioned three districts of three major pulses-producing Indian States during 2017-2018.
The farmers were selected through a random sampling technique. The sample consisted
of 482 pigeon pea farmers and 316 chickpea. Out of which 227 farmers were cultivating
both chickpea and pigeon pea. The survey was conducted through questionnaire, framed
in such way as to draw out details covering household characteristics, wealth and farm
characteristics, institutional and access related variables, risk and economic factors.
After discussing the background, objectives, data and methodology in the first chapter,
the second chapter provided an overview of pulses economy with a special emphasis on
the trends in area, production and yield in comparison with world. The analysis broadly
showed that there had been a substantial decline in area and production of pulses in
India. Indian yield was much below the world average and the yield gap between the two
got widened since 2001. It was the same year, the decline in production of pulses was
more prominent. However, in the year 1991, the yield gap got narrowed and came very
close to the world average. Interestingly, this was the same year when India marked a
record production in pulses.
The 5th chapter provided an overview of the socio-economic profile of the sample
households. The total households interviewed were 572 drawn from three major
pulses producing States-Karnataka, Maharashtra and Madhya Pradesh. Majority of the
xii PRODUCTION, MARKETS AND TRADE: A DETAILED ANALYSIS OF FACTORS AFFECTING PULSES PRODUCTION IN INDIA
households in the sample were either semi medium or medium farmers and agriculture
was the main livelihood option for majority of the sample households. Narsinghpur
(Madhya Pradesh) had the highest share of large farmers in the sample whereas Wardha
(Maharashtra) had the highest share of marginal and small farmers. In our sample, 482
farmers were cultivating pigeon pea and 316 farmers were cultivating chickpea. Out of
which 227 farmers were cultivating both the pigeon pea and chickpea. Majority of the
sample households didn’t have any awareness of government schemes to promote pulses
production or new production techniques to reduce crop loss and improve productivity. The
farm size wise analysis showed that large farmers were more aware about new production
practices as compared to other farm categories. However, the access to training offered by
government and extension services were the highest among the sample households from
Wardha (Maharashtra). Interestingly, despite having higher access to training, extension
services and knowledge about government schemes and new production techniques, the
information of MSP received by households in Wardha (Maharashtra) were lower than
that of Narsinghpur (Madhya Pradesh). This is due to the fact that Narsinghpur (Madhya
Pradesh) had the highest share of large farmers in the sample. The size wise percentage of
farmers who received training showed that large farmers had received more training. The
training was relatively higher for semi medium, medium and large farmers as compared
to marginal and small. In addition to the fact that Narsinghpur (Madhya Pradesh) had
relatively large farmers with greater access to training, the households from Narsighpur
(Madhya Pradesh) had greater access to information regarding MSP. The access to MSP
information was increasing as size of the farm increases. Interestingly, though households
in Narsinghpur (Madhya Pradesh) had the highest information about MSP, households
availing MSP was much lower and lower than Wardha (Maharashtra). In Maharashtra
almost all farmers who had information about MSP availed MSP. The percentage share
of households with information was 52% and utilisation was 50%. The percentage share
of households in each farm size category who were availing MSP was the highest among
semi medium, medium, and large households. The percentage share of households who
were not availing MSP was the lowest among marginal and small farmers.
The analysis in the 6th chapter showed showed that there has been a substantial increase
in the imports of most of the pulses in the last several years. Also the share of India’s
imports in world imports of pulses also a sharp increase. This points out the increasing
import dependency and severe supply deficit that India is facing in terms of meeting the
demand for protein rich crop. The widening gap between supply and demand, and the
domestic uncertainties with respect to the production etc. might continue to increase
the import dependency unless effective policy measures are undertaken to improve the
production and productivity and pulses. The implications of long term dependency on
import depends upon the nature of import pricing that is undertaken by the importers as
we have already discussed the import of each type of pulses is dominated by one or two
single largest importers. This may increase the potential for monopoly pricing.
PRODUCTION, MARKETS AND TRADE: A DETAILED ANALYSIS OF FACTORS AFFECTING PULSES PRODUCTION IN INDIA xiii
Chapter 7 did an analysis of pricing behaviour of pulses importers in Indian market
and the exchange rate pass through into imported pulses prices. When the currency
of importing country depreciates, the import is expected to become costlier. However,
if the exporter is absorbing part of the increase in price to retain the market share in
the importing country, then the exchange rate pass-through into import prices will be
partial or incomplete. The elasticities of import prices with regard to changes in the
exchange rate can range from 0% to 100%, depending on the pricing strategy of exporters.
Additionally, it also shows whether an exporter is following a producer pricing strategy
or local currency pricing. The former takes place in a perfectly competitive setting where
the low of one price is expected to prevail due and as a result any change in exchange
rate will get fully transmitted to import prices. The latter takes place under imperfect
competition. Employing the econometric technique of panel corrected standard errors
(PCSE) estimation technique in pricing to market (PTM) framework, the results from our
analysis showed that the most of the importers were practicing non-competitive pricing
behaviour due to both the market specific characteristics as well as exchange rate induced
effects.
The significance of the exchange rate parameter βi and the country-specific effects
parameter λi in most of the models indicates that the importers work with a fluctuating
exchange rate and a varying mark-up over marginal cost. The analysis of the asymmetric
effects of exchange rates through an interaction dummy showed that for majority of the
products, the appreciation of the Indian rupee against the partner country had greater
impact than the depreciation.
We tested the PTM model under three different exchange rates, i.e. the nominal, the real
and the commodity-specific (import) trade-weighted exchange rates. For all the products
under study, we observed PTM in at least one of the destination markets either through
exchange rate changes and/or through country specific effects. The analysis also showed
that the commodity specific exchange rate better predicts the PTM behaviour in the case
of kidney beans and peas whereas the nominal exchange rate better predicts the PTM
behaviour of chickpea and pigeon pea.
The analysis of the exchange rate effect showed that local currency price stabilization by
the Indian importers was more prominent than the amplification of exchange rates. This
is indicating competition among other importers.
Chapter 8 discussed the evolution of agricultural and food security policies in India along
with the effectiveness of MSP and procurement. The data and studies at the national level
broadly indicated that MSP is an important policy instrument in encouraging farmers
and to stabilize market prices. However, the percentage of farmers who were aware
of MSP was less especially for pulses. This was also reflected in the lack of knowledge
xiv PRODUCTION, MARKETS AND TRADE: A DETAILED ANALYSIS OF FACTORS AFFECTING PULSES PRODUCTION IN INDIA
about procurement agencies. Interestingly the percentage of households who sold their
products to procurement agencies were even lower than the percentage of households
who had information about procurement agencies. In chapter 5 our analysis of sample
households from three states selected for analysis also showed poor awareness of MSP.
The farmers who avail MSP even with a positive information about MSP was also lower.
Therefore, in chapter 9 we analysed the factors influencing the access to information

regarding MSP and the decision to avail MSP. The regression equation was estimated using
the conditional mixed-process (CMP) command which uses the mixed process estimator.
The results showed that Maharashtra farmers were more enthusiastic in availing MSP
despite of the fact that the information regarding MSP was highest among the farmers
from Madhya Pradesh. However, farmers who had more diversified crop cultivation were
not very enthusiastic in availing MSP. The majority of the farmers in Madhya Pradesh
in our sample were large farmers and most probably they are more diversified. Market
access came out to be as an important factor in information and in availing MSP. The
risk faced by farmers also increased the chances to avail MSP and this points out how
important MSP is in mitigating the negative effects of risk.
The supply response of two major pulses produced by 4 major states are analysed in
chapter 10 using Nerlove’s expectation framework. The results from our analysis indicated
that lagged area under cultivation is significant in impacting the production of pigeon pea
whereas the yield was significant in the case of chickpea. Prices of competing crops had
a negative impact in both the models. The government policy variable-NFSM came out to
be significant only in the case of pigeon pea. Interestingly, MSP was significant only in
the case of pigeon pea and not for chickpea. This shows the government policies are not
significant in influencing the production of chickpea.
To sum it up, the study provided evidences for non-competitive pricing behavior of
importers. In the context of an increase in import dependency on the one side and the
concentration of exporting countries on the other side, the non-competitive pricing
behavior can have huge implications on the domestic price behavior and volatility.
Additionally, the depreciation of Indian currency can make import costlier. Therefore,
policies to enhance domestic production needs to be scaled up. As far as the policies are
concerned there is a huge information asymmetry among the farmers. Most marginal
and small farmers were deprived of the information, training and extension services
whereas large farmers had greater access to all these. Another interesting observation
was the lack of awareness of MSP among pulses producing farmers. Even those farmers
who had information about MSP did not avail MSP due to the delay and uncertainty in
price settlement. Additionally, the distance to procurement centers results in heavy
transportation cost and thereby the distance to market and procurement centers reduced
the probability of availing MSP.
PRODUCTION, MARKETS AND TRADE: A DETAILED ANALYSIS OF FACTORS AFFECTING PULSES PRODUCTION IN INDIA xv
Chapter
01 Introduction
1.1 Introduction
Pulses are an essential part of Indian diet as they are a dominant source of protein. Pulses
are “the poor man’s meat” because the consumption of dairy and animal products is very
low among the poorest segment of both rural and urban India. Pulse crops are used as
green manure and contribute in improving soil health. Therefore, pulses contribute in
improving human health as well as conserving soil through their nitrogen fixing properties.
The vital role played by pulses in the agriculture system and in the diets of people makes
it an ideal crop for achieving food and nutritional security, reducing poverty and hunger.
Although India is the largest producer and consumer of pulses accounting for 25% of
world production and 27% of world consumption (Srivastava et.al., 2010), the production
of pulses were nearly stagnant until recently for nearly 40 years (Sekhar and Bhatt, 2012).
The two reasons for this poor performance are firstly, the area under pulses is rain fed and
secondly, pulses are mainly grown as a residual crop on marginal lands (Sekhar and Bhatt
2012). Farmers are not motivated to produce pulses owing to high production and price
risk and also due to lack of effective procurement (Sekhar and Bhatt, 2012). As a result of
all these, pulses witnessed a drastic decline in India especially during 1960-70s and this
regime also coincides with the spread of green revolution in cereals. During this period,
the area under pulses was acquired by cereal crops leading to a decline in area under
pulses and the spread of green revolution technology resulted in huge yield improvement
in cereals and made cereal crops relatively more competitive on farms (Akibode et.al.,
2011).
The latest available data shows that the production of pulses in India was 17.15 million
tons in 2014-15 which declined to 16.35 million tons in 2015-16 and further increased to
22.14 million tons in 2016-7 (Department of Agriculture and Cooperation, 2017). There
could be several factors that might have contributed to short term increase in pulses
production including the government interventions such as National Food Security
PRODUCTION, MARKETS AND TRADE: A DETAILED ANALYSIS OF FACTORS AFFECTING PULSES PRODUCTION IN INDIA 1
Mission (NFSM), favorable rainfall etc. However, some newspaper reports show that the
area under pulses have gone down in the latest kharif season. Pulses acreage has fallen to
130.68 lakh hectares, from the earlier 135.42 lakh hectares (the pioneer, 2017). Therefore,
the current trends in area and production of pulses generally reveal the uncertain and
fluctuating nature of the production of pulses which are vital for food and nutritional
security of the country.
Gram, Tur, Moong and Urad are the major pulses produced and consumed in India. Gram
(chickpeas) is the most dominant pulse with an average share of around 46 percent in the
total pulse production during the past five years. The major states contributing to pulse
production include Madhya Pradesh, Maharashtra, Uttar Pradesh, Rajasthan and Andhra
Pradesh. Based on triennium ending 2010-11, the contribution of chickpea to total pulses
area was 35%, pigeonpea 16%, Moongbean 13%, Urdbean 12%, Lentil 7%, Fieldpeas
3%, Horsegram 2% and Lathyrus 2%. Chickpea is majorly grown in Madhya Pradesh,
Rajasthan, Maharashtra, Karnataka, Andhra Pradesh, Uttar Pradesh, Chhattisgarh and
Gujarat (Singh, 2013).
1.2 Key Issues: Production Uncertainty and High Import Dependency

The recent decline in pulse production resulted in excess demand and an unprecedented
rise in pulse price. An upward trend was observed in the price of pulses especially after
2005. In 2006, there was a sudden increase in imports of pulses which led to a high global
price. The year 2009 was a poor agricultural year which led to an increase in price due
to shortage in supply. Further in 2012, high Minimum Support Prices (MSP), high world
price and depreciation of Indian rupee led to an exorbitant increase in pulse price (Reddy,
2015). A double digit trend in Wholesale Price Index (WPI) inflation of pulses was observed
in 2015, reaching 39 percent in September 2015-16 which is very high relative to that of
cereals (Ministry of Commerce & Industry, 2016).
Due to growing population, declining pulse production and rising pulse prices the net
per capita availability of pulses in India has witnessed a sharp decline. The per capita
net availability of pulses has declined from 60.7 grams/day in 1951 to 41.9 grams/day in
2013. Presently, 17 million tons of pulses are being produced annually and in order to
attain self-sufficiency, the pulse requirement is projected at 50 million tons by 2050 which
requires an annual growth rate of 4.2% (Indian Institute of Pulses Research, 2013).
Based on the MSP recommended by Commission on Cost and Agricultural Prices (CACP)
for 2015, the movement of MSP for major pulses in last five years has shown a continuous
increase. Among the major pulses, the compound annual growth rate in the MSP for Tur,
Gram, Moong and Urad has been higher than that of cereals. However, lucrative MSPs
alone will not be enough to persuade farmers to produce pulses. It is important that
2 PRODUCTION, MARKETS AND TRADE: A DETAILED ANALYSIS OF FACTORS AFFECTING PULSES PRODUCTION IN INDIA
farmers are backed up by procurement operations to ensure them that market price does
not fall and prevent them from producing pulses in the future. The procurement of pulses
has been negligible at about 1 to 4 per cent of production of pulses compared to 28 to 30
per cent of cereals during 2012-13 to 2014-15 which forced farmers to sell their crops at a
loss (CACP, 2015). Thus, a decline in pulse production resulted in excess demand and an
unprecedented rise in pulse price. In order to meet the consumption demand of the rising
population there has been an increase in the volume of imports in recent years.
During the 1970s and 1980s, imports were restricted in order to protect the interest of
domestic farmers. The government achieved this by imposing trade barriers such as
quotas, tariffs and quantitative restrictions. It was in 1990-91 when India faced a balance
of payment crisis that the possible growth benefits of trade liberalization were realized
and import duties declined steadily. From 2007-12, imports of pulses were made duty free
and in 2013 the custom’s duty on imports was reduced to zero (Negi and Roy, 2015). The
perpetual shortage in India’s pulses production in the wake of rising demand and adoption
of a more liberal approach to international trade led to a rise in the volume of imports in
the past decade.
The current pulses scenario in India shows that the domestic supply of pulses was not
able to meet the rising demand from domestic consumers. This was due to the fact that
different parts of the country had dietary preferences for specific type of pulses. An
interesting pattern of consumption that has been observed for pulses in India is that
there is very little substitution among different types of pulses (Joshi et.al., 2017).The yield
performance of pulses has been low because genetic potential for high yields is limited
and pulses are vulnerable to pests and diseases. Pulse production can be increased by
5-6 million tonnes by 2020 by promoting adoption of shorter duration pulse varieties and
varieties that are disease and pest resistant (Joshi et.al., 2017). Mechanical harvesting of
the pulse crop and crop production and protection technologies have also been limited
(Indian Institute of Pulses Research, 2013). Apart from this aspect, lack of assured
market, ineffective government procurement operations, unfavorable prices and trade
liberalization make pulse production less attractive for farmers compared to other crops
(Thomas et.al., 2013). Due to this, the relative profitability of pulse crops reduced despite
of exorbitant increase in pulse price. Insurance to reduce risk associated with pulses
production can incentivize farmers to grow more pulses and make them more responsive
to pulse prices (Joshi et.al., 2017). In a study by Srivastava (2010), revenue terms of trade
between pulses and cereals was evaluated and it was inferred that farmer’s preference
was inclined towards production of cereals rather than pulses, despite of a higher MSP
for pulses.
As mentioned already, pulses are grown in rain fed regions with limited input requirement,
high degree of risk associated with production such as inadequate price incentives for the
farmers to produce pulses. More than 83 percent area under pulses is rain fed. As a result
government intervention in pulses production has assumed significance. The National
Development Council in May 2007 adopted the resolution to launch the National Food
Security Mission, with the objectives to increase rice production by 10 million tons, wheat
by 8 million tons and pulses by 2 million tons by the end of Eleventh Five Year plan (2011-
12). The pulse component of NFSM was initially launched in 171 districts across 14 states
of the country. The pulse component of Integrated Scheme for Oilseeds, Pulses, Oil Palm
and Maize (ISOPOM) was serving the pulse growers in the non-NFSM districts. Later the
pulses component of ISOPOM was merged with NFSM to avoid administrative difficulties
and duplication of efforts. After the merger, 433 districts in the 14 states will be covered by
the pulse component of NFSM (Thomas et.al., 2013).
One of the key interventions under NFSM was the delivery of quality seeds of improved
variety which resulted in an increase in pulse production in 2010-11. Further, the NFSM
program was responsible in providing technological inputs for plant protection and
production technologies to the farmers cultivating pulses in the NFSM districts. Two
important components in case of pulses were the integrated soil nutrient management
(INM) and integrated pest management (IPM) (Thomas et.al., 2013).
Given the significance of government intervention in pulse production, one of the

objectives of the study is to analyze the impact of government intervention on supply of
pulses in the form of NFSM on area, production and yield of India’s major pulses and to
identify the major constraints in raising the production and productivity of pulses. The
other objectives of the study are to analyses the factors influencing farmers’ access to MSP
and the exchange rate pass through and nature of pricing behavior of pulses importers to
India.
Using the household level data, the present study will make an attempt to examine the
factors affecting the pulses farmers’ (chickpea and pigeon pea) access to information
regarding MSP and utilisation of MSP. The major pulses producing states of the country
are selected for a detailed household level analysis. The other two objectives are analysed
using the secondary data. Area, cost of production, prices and non-price factors are used
in analyzing the factors influencing the supply of pulses. The import data, exchange rate
and Consumer Price Index(CPI) are used for the analysis of pricing behavior and exchange
rate pass through.
1.3 The detailed objectives of the study can be listed as follows,

1. To analyze the factors affecting the production of major pulses.
2. To understand the impact of Minimum Support Price (MSP) policy and NFSM on the
production of pulses.
3. To analyze the implications of pulses trade and the import pricing behavior and
exchange rate pass through into major pulses imported to India.
1.4 Study Area
The present study focuses on chickpea and pigeon pea. However, the import pricing
analysis will make use four major pulses imported to India. They are chickpea, pigeon
pea, dry peas and kidney beans.
For the household level data analysis three major pulses producing states from India is
identified. They are Maharashtra, Madhya Pradesh and Karnataka.
Maharashtra (APY declining), Madhya Pradesh (APY improving) and Karnataka (area is
declining but production & yield are improving) are selected for the purpose of analysis
for chickpea. Madhya Pradesh (area is declining but production & yield are improving)
Karnataka (APY improving) and Maharashtra (APY declining) are identified for the
purpose of pigeon pea. The states for each pulse is selected in such a manner that one
state generally shows an increase in the production while the other shows a decline in
production over the past 36 years. (Please see the figures in appendix for more details). The
district selected for the purpose of analysis within Maharashtra is Nagpur. Narsinghpur is
selected for the purpose of analysis from Madhya Pradesh. Gulbarga district is selected
for the purpose of analysis from Karnataka.
For secondary data analysis, of supply response, all the major pulses producing states are
selected. They are Karnataka, Madhya Pradesh, Maharashtra and Uttar Pradesh.
1.5 Data Collection

The analysis is based on both primary as well as secondary data.
The primary data will be collected through a comprehensive household level survey.
Villages/regions that have the highest production of the selected pulses are identified for
the purpose of analysis. From each state, one of the major pulses producing district was
selected for further analysis. From Karnataka, Gulbarga was selected, from Maharashtra,
Wardha was selected, and from Madhya Pradesh, Narsinghpur was selected. Subsequently
a random sample of pulses producing households are selected and interviewed. The
interviews will be based on structured survey questionnaire administered by well-trained
and experienced enumerators who have knowledge of the local farming system and the
local language.
The sample consisted of 482 pigeon pea farmers and 316 chickpea. Out of which 227
farmers were cultivating both chickpea and pigeon pea. The survey was conducted
through questionnaire, framed in such way as to draw out details covering household
characteristics, wealth and farm characteristics, institutional and access related variables,
risk and economic factors.
The secondary data will be collected from various sources. Trade data will be collected
from World Bank’s World Integrated Trade Solution database (WITS). The unit import
price will be calculated using the import quantity and import value data obtained from
Directorate General of Commercial Intelligence and Statistics (DGCI&S). The all India
as well as state level data on area and production of pulses is Centre for Monitoring of
Indian Economy’s (CMIE) states of India data. The data on exchange rate is obtained from
OANIDA and the Consumer Price Index is obtained from World Bank indicators. The data
on cost and prices were obtained from Directorate of Economics and Statistics.
1.6 Methodology
The access to MSP information and utilisation of MSP is analysed using an equation based
on a Conditional Mixed Process (CMP) estimator. The pricing to market and exchange
rate pass-through is analysed using Panel Corrected Standard Error (PCSE) estimation
technique. The supply response of pulses is analysed using a dynamic supply response
equation is developed based on the theoretical framework of Nerlove’s expectation model.
1.7 Chapter Scheme

Chapter
An Overview of
02 Pulses Economy
2.1 Introduction
India contributed around 38% of world’s area under pulses in 2016. India’s share in world
area was around 56% in 1961 but gradually declined to less than 40% since 2000 (see
figure 2.1). In terms of production, India contributed around 23% in 2016, whereas India’s
contribution was around 45% in 1961 (see figure 2.2). Though India’s pulses production
was always fluctuating the decline in the share of production was more prominent since
2001. Similarly, Indian pulses yield was also much below the world average. (see figure
2.4)
Figure 2.1: Area under Production of Pulses (in Thousand Hactors)
7000
6000
5000
4000
Area in 000 ha
3000
2000
1000
0
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
Year
India World
Source: FAOSTAT
The area under pulses production in India in 1961 was around 3592 thousand hectares but
sharply declined to 2039 thousand hectares in 2016. In the case of world as a whole the
area under pulses declined from around 6396 hectares to around 5423 hectares during the
same period (see figure 2.1). However the decline in area in India was at a much larger
pace as the decline in share rightly indicates (see figure 2.2)
Figure 2.2: Area under Indian Pulses as Percentage of World Area under Pulses
60
50
40
In Percentage
30
20
10
0
1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
Year
Source: FAOSTAT
The total production of pulses 1450 thousand tonnes in 1961 to 921 thousand tonnes in
2016. In India the production was the highest in 1991 marking 1507 thousand tonnes of
production (see figure 2.3). Interestingly during the same year the world production was
also relatively high as 4092 thousand tonnes. But the world production was the highest in
the year 2014 marking 4714 thousand tonnes of production. The faster rate of decline in
production in India as compared to world production was also reflected in the declining
share of India’s production in world production (see figure 2.4). India’s share in production
declined from around 45 % in 1961 to only 23% in 2016 (see figure 2.4). The share was the
lowest in 2003 marking only 18%. India being the major producer of pulses, the shrinking
size of area and production of pulses is an alarming factor especially considering the
population growth and protein intake for the poor segments of the country and nutritional
implications.
The above is especially true when the Indian pulses yield is much below the world average
(see figure 2.5). Interestingly the trends in the yield for both India and the world were
somewhat similar. Another interesting observation is in the year 1991, India’s yield in
pulses were almost similar to world yield. Indian yield was 7096 Hg/Ha whereas world
yield was 7252 (see figure 2.5). Note that this was the year India achieved the record
production in pulses. Therefore, an understanding the factors that contributed to higher
production and productivity in pulses in the year 1991 is very crucial to understand and
promote policies that would help in enhancing pulses production.
Again in 2001, the Indian yield got closer to world yield. Indian yield was 7879 whereas
the world yield was 8674. Unfortunately, since 2001, the yield gap between the world and
India got widened and Indian yield went much below the world yield. As observed earlier,
the declining share of India’s pulses production in world pulses production was also more
prominent since 2001. The decline and widening gap in the yield could be the reason for
the declining share in India’s pulses production.
Figure 2.3: The Trends in Production of Pulses
5000
4000
Production in 000 tonnes
3000
2000
1000
0
1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
Year
India World
Source: FAOSTAT
Figure 2.4: Production of Indian Pulses as Percentage of World Production of Pulses
50
40
30
In percentage
20
10
0
1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
Year
Source: FAOSTAT
Figure 2.5: Yield of Pulses in Hg/Ha
10000
8000
Yield, Hg/Ha
6000
4000
2000
0
1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
Year
India World
Source: FAOSTAT
India grows and consumes several types of pulses primarily because of heterogeneity in
preference across regions. Pulses are grown in all three seasons. The three crop seasons
for the commodity are:
i. Kharif: Arhar (Tur), Urd (Blackgram), Moong (Greengram), Lobia (Cowpea), Kulthi
(Horsegram) and Moth;
ii. Rabi: Gram, Lentil, Pea, Lathyrus and Rajmash;
iii. Summer: Greengram, Blackgram and Cowpea.
The major pulses produced in India are pigeon pea and chickpea. However, in the
subsequent sections we analyse the area and production scenario of two more Pulses-
Kidney beans and Peas. These crops are selected as they are heavily imported by India
consistently over the last couple of years. We have also made an analysis of import pricing
behavior of importers of all the above mentioned crops (refer to chapter 7).
The total area under pulses production was the highest in Madhya Pradesh and this was
followed by Rajasthan, Maharashtra, Karnataka, Uttar Pradesh and Andhra Pradesh. The
share of these states in total area remains to be more or less the same with an increased
share of Rajasthan (see Table 2.1).
Figure 2.6: Total Area under Pulses Production in India, State-wise, in Thousand Hectares
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Madhya Pradesh Maharashtra Karnataka Uttar Pradesh Andhra Pradesh
2014-15 2015-16 2016-17
Source: CMIE States of India
Table 2.1: Share of Major Pulses Producing States Area in Total Area
Madhya Uttar Andhra
Rajasthan Maharashtra Karnataka
Pradesh Pradesh Pradesh
2014-15 23 14 14 10 10 4
2015-16 24 16 14 11 10 6
2016-17 23 18 15 10 9 5
The area under chickpea was also the highest in Madhya Pradesh and this was followed
by Rajasthan, Maharashtra and Karnataka. When area under chickpea remained more or
less the same in Madhya Pradesh during the three years under analysis, the area under
chickpea in other states showed slightly more fluctuations (see figure 2.7). When all these
states experienced a mild decline in area under chickpea, the area increased in Karnataka
in 2015-16. However, when all the states experienced an increase in area, Karnataka
experienced a decline in 2016-17. This actually shows that farmers are adjusting their area
under cultivation based on the surplus production and the subsequent market prices. The
increase in one year and then decline in the next year in area allocation is a testimony to
this fact.
Figure 2.7: Area under Chickpea in India in Major Producing States, in Thousand Hectares
3500
3000
2500
2000
1500
1000
500
0
Madhya Pradesh Rajasthan Maharashtra Karnataka
2014-15 2015-16 2016-17
Table 2.2: Share of Major Chickpea Producing States Area in Total Area in India
Year Madhya Pradesh Rajasthan Maharashtra Karnataka
2.14-15 32 19 18 10
2015-16 36 11 17 17
2016-17 33 16 20 10
As compared to the concentration of production of chickpea area in few states, there were
more states producing pigeon pea. The highest area under pigeon pea was in Maharashtra
and this was followed by Karnataka, Madhya Pradesh and Uttar Pradesh. Telengana,
Gujarat and Andhra Pradesh were the other major producers (see figure 2.8). All the
states experienced an increase in area under cultivation in 2016-17. The increased area
allocation could be due to the high market prices prevailed in the previous year. Though
area had increased in 2016-17, the share of some of these states’ in total area under pigeon
pea in India had declined as compared to the previous year. For example, the share in area
had declined in Maharashtra, Madhya Pradesh and Uttar Pradesh while the share had
increased in Karnataka (see table 2.3).
Figure 2.8: Area under Pigeon Pea in India in Major Producing States, in Thousand Hectares
1600
1400
1200
1000
800
600
400
200
0
2014-15 2015-16 2016-17
Table 2.3: Share of Major Pigeon Pea Producing States in Total Area under Pigeon Pea in India
Madhya Uttar Andhra
Year Maharashtra Karnataka Telangana Gujarat
2014-15 29 21 12 8 7 5 5
2015-16 31 17 15 7 6 6 6
2016-17 27 23 13 6 7 7 7
The production of kidney beans was concentrated only in Rajasthan with a negligible
share also from Gujarat. Rajasthan contributes almost all of the kidney beans produced
in India. The lack of sufficient supply in kidney beans could be the reason for substantial
imports in kidney beans. The area under kidney beans experienced an increase over the
three periods under study (see figure 2.9).
Figure 2.9: Area under Kidney Beans in Major Producing States of India, in Thousand Hectare
1600
1400
1200
1000
800
600
400
200
0
2014-15 2015-16 2016-17
Rajasthan Gujarat India
The area under peas was the highest in Uttar Pradesh and Madhya Pradesh. Madhya
Pradesh experienced a continuous increase in area under peas during the three-year
period (see figure 2.10). The other two producers were Odisha and Jharkhand. However
they had only a negligible share in total area under peas.
Figure 2.10: Area under Peas in Major Producing States of India, in Thousand Hectares
500
450
400
350
300
250
200
150
100
50
0
Uttar Pradesh Madhya Pradesh Odisha Jharkhand
2013/14 2014-15 2015-16
As in the case of area, the production of pulses is also the highest in Madhya Pradesh (see
figure 2.11). This was followed by Maharashtra, Rajasthan, Uttar Pradesh, Karnataka and
Andhra Pradesh. Though Karnataka had more area under production, Uttar Pradesh has
more production as compared to Karnataka. This points out the productivity differences
in production. Though the production has increased in Madhya Pradesh, the share of
the state in total production in the country declined to 27.20% as compared to 32.43%
in 2015-16 (see table 2.4). In the case of Maharashtra, both the production and the share
had increased considerably in 2016-17 as compared to 2015-16. The share of Maharashtra
increased from 9.45 % to 16.29% (see table 2.4).
Figure 2.11: Production of Pulses in Major Producing States, (in Thousand Tonnes)
7000
6000
5000
4000
3000
2000
1000
0
Madhya Maharashtra Rajasthan Uttar Pradesh Karnataka Andhra
Pradesh Pradesh
2014-15 2015-16 2016-17
Table 2.4: Production Share by Major Pulses Producing States

Madhya Uttar Andhra
Year Maharashtra Rajasthan Karnataka
2014-15 28.15 11.97 11.38 8.39 8.10 5.54
2015-16 32.43 9.45 12.17 7.12 6.97 7.52
2016-17 27.20 16.29 13.75 9.44 7.51 4.02
Production of pigeon pea was the highest in Maharashtra and this was followed by
Karnataka and Madhya Pradesh. The production of pigeon pea increased considerably
in Maharashtra in 2016-17 as compared to 2015-16 (see figure 2.12). The production had
increased in Karnataka also. But in the case of Madhya Pradesh, Gujarat and Uttar Pradesh
the production increased continuously over the three year period (see figure 2.12).
Due to substantial increase in production in Maharashtra, the share also increased from
22% to 31 % (see table 2.5). The share of Karnataka also increased from 9% to 19%.
Figure 2.12: Production of Pigeon Pea in Major Producing States
1600
1400
1200
1000
800
600
400
200
0
Maharashtra Karnataka Madhya Pradesh Gujarat Uttar Pradesh
2014-15 2015-16 2016-17
Table 2.5: Share of Major Pigeon Pea Producing States’ Production in Total Production
Year Maharashtra Karnataka Madhya Pradesh Gujarat Uttar Pradesh
2014-15 26 17 18 8 6
2015-16 22 9 24 10 7
2016-17 31 19 16 8 7
Madhya Pradesh was the highest producer of chickpea. This was followed by Maharashtra
and Rajasthan (see figure 2.13). Though the absolute amount of production increased in
Madhya Pradesh, the share declined from 48% to 38% during the three-year period under
study (see table 2.6). Whereas the share increased in Maharashtra, Rajasthan and Uttar
Pradesh (see table 2.6). The share of Maharashtra increased from 11% to 18%, Rajasthan
from 12% to 15% and Uttar Pradesh from 2% to 7%.
Figure 2.13: Production of Chickpea in Major Producing States
4000
3500
3000
2500
2000
1500
1000
500
0
Madhya Maharashtra Rajasthan Karnataka Andhra Uttar Pradesh
Pradesh Pradesh
2014-15 2015-16 2016-17
Table 2.6: Share of Major Chickpea Producing States’ Production in Total Production
Madhya Andhra Uttar
Year Maharashtra Rajasthan Karnataka
2014-15 40 15 12 9 5 5
2015-16 48 11 12 9 7 2
2016-17 38 18 15 6 4 7
The production of peas was mainly by Madhya Pradesh and Uttar Pradesh. Though Orissa
was the third in area under cultivation of peas, the productivity of peas was very less
in Orissa. This was the reason why Orissa was not appearing among the top producers
of peas. Though Jharkhand was not appearing among the top states in terms of area
under cultivation, it has appeared among the top in terms of production indicating better
productivity of peas in Jharkhand as compared to Rajasthan or Orissa (see figure 2.14).
The total peas production had increased from 742 thousand tonnes in 2015-16 to 1011
thousand tonnes in 2016-17.
Figure 2.14: Production of Peas in Major Producing States
450
400
350
300
250
200
150
100
50
0
Madhya Pradesh Uttar Pradesh Jharkhand Rajasthan
2014-15 2015-16 2016-17
Rajasthan contributed almost all of the kidney beans produced in the country along with
a negligible share from Gujarat (see figure 2.15).
Figure 2.15: Production of Kidney Beans in Major Producing States
500
450
400
350
300
250
200
150
100
50
0
India Rajasthan Gujarat
2014-15 2015-16 2016-17
Conclusion
An analysis of area, production and yield of pulses and major pulses produced in India
showed that there was a substantial decline in area and production of pulses in India. Indian
yield was much below the world average and the yield gap between the two got widened
since 2001. It was the same year, the decline in production of pulses was more prominent.
However, in the year 1991, the yield gap got narrowed and came very close to the world
average. Interestingly, this was the same year when India marked a record production in
pulses. The declining share in area and production and widening gap between the yield
is very alarming in the context of an increased demand for pulses. Since it is a protein
rich crop, and there is a decline in per capita availability of pulses, considerable efforts
are required to boost the production. The year 2016-17 shows marginal increase in the
production of pulses. Though the dominant producing states have either continued or
marginally improved the production, an increase in production was observed by other
states who were not major contributors of pulses. This could be due to the impact of
government policies such as an increase in MSP or the efforts to boost production through
National Food Security Mission (NFSM). The subsequent chapters will make an analysis of
these factors in greater detail.
Chapter Pulses Production and
03 Food Security
3.1 Introduction
India’s total food grain production substantially increased from around 80 million
tonnes in 1965 to around 250 million tonnes in 2015 (Bhattacharya et.al., 2017). Though
the improvement in self-sufficiency had a positive impact on production, the per capita
availability declined consistently and the difference becomes starker when one looks at
the fact that an average family of five had 198 kg of food grain less to eat than in 1991
(Pal et.al., 2019). The scenario becomes more dismal in the case of pulses though with a
paramount importance in contribution to food and nutritional security remained outside
the ambit of productivity benefits (Bhattacharya et.al., 2017).
The per capita net availability of pulses in the country was 62.19 g/capita/day in 1961,
which is reduced sharply to 34.42 g/capita/day in 1974. Although the figure showed some
tendency to improve in the next few years to 44.45 g/capita/day, it further declined to 39.45
g/capita/day in 2013 (see figure 3.1). The figures overall point out a sharp and persistent
decline in the per capita net availability of pulses.
The available projection based on supply demand gap reveals huge excess demand (Jadhav
et al, 2018). For example, the projection using the population and income data showed
that the demand for chickpea (gram) and pigeon pea (tur) would reach 62.31 and 143.30
lakh tonnes by the end of 2020 and by the end of 2030 the demand for gram and tur is
expected to increase to 171.10 and 391.70 lakh tonnes, respectively (Jadhav et.al., 2018).
The projected demand for pigeon pea (tur) is greater than chickpea (gram) possibly due
to the low productivity of pigeon pea (tur) due to lack of moisture availability in soil as
it is grown mainly in dry lands (Jadhav et al, 2018). As a result, the projected shortfall
in supply due to the excess demand for chickpea (gram) would be 47.5 lakh tonnes by
2025 and 114.5 lakh tonnes by 2030. Similarly, for pigeon pea (tur), the projected shortfall
would be around 211.6 lakh tonnes by 2015 and this is expected to increase to 365.6 lakh
tonnes by the end of 2030 (Jadhav et.al., 2018).
Figure 3.1: The Per Capita Net Availability of Pulses in India (in gm/capita/day)
70
60
50
40
30
20
10
0
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
Source: FAOSTAT
Pulses, in India assumes significant relevance in promotion food and nutritional security
as it is a staple source of protein to a significant share of Indian population. The estimates
show that the daily protein requirement of an average person is 56 gram, and 100 grams of
pulses contain 25 grams of protein (Rampal, 2017). This is two times higher than the protein
available in wheat and three times higher than the protein available in rice (Bhattacharya
et.al., 2017). Additionally, some estimates show that around 31 percent of Indians are
vegetarian (Rampal, 2017) and therefore a large part of their protein requirement can be
met by consuming pulses. Therefore, at least half of the daily requirement of protein can
be met by including two servings of pulses in the daily diet.
Pulses are also a rich source of fiber, vitamins and minerals, such as iron, zinc, folate
and magnesium. Just as pulses provide nutritional benefits to humans, they also produce
a number of different compounds that feed soil microbes, thus benefiting soil health
(Bhattacharya et.al., 2017). Table 3.1 summarises the nutritional content of some of the
major pulses produced and consumed in India.
Table 3.1: Nutritional Content of Major Pulses in India (per 100 gram)
Urad
Pigeon Green Kidney
Chickpea Lentil (black Cowpea Pea
pea Gram beans
gram)
Protein(g) 19.3 21.7 25.8 25.21 23.86 23.85 24.55 23.58
Total lipid(fat)g 6.04 1.49 1.06 1.64 1.15 2.07 1.16 0.83
Carbohydrate, by
60.7 62.8 60.1 59 62.6 59.6 60.4 60
diff(g)
Urad
Pigeon Green Kidney
Chickpea Lentil (black Cowpea Pea
pea Gram beans
gram)
Fibre, total dietary(g) 17.4 15 30.5 18.3 16.3 10.7 25.5 24.9
Sugar(g) 10.7 2.03 6.6 8 2.23
Calcium (mg) 105 130 56 138 132 85 55 143
Iron(mg) 6.24 5.23 7.54 7.57 6.74 9.95 4.43 8.2
Magnesium (mg) 115 183 122 267 189 333 115 140
Phosphorous(mg) 366 367 451 379 367 438 366 407
Potassium(mg) 875 1392 955 983 1246 1375 981 1406
Sodium(mg) 24 17 6 38 15 58 15 24
Zinc(mg) 3.43 2.76 4.78 3.35 2.68 6.11 3.01 2.79
Vitamin C(mg) 4 4.4 4.8 1.5 1.8 4.5
Vitamin B-6(mg) 0.535 0.283 0.54 0.281 0.382 0.361 0.174 0.397
Vitamin A (mg) 67 28 39 23 114 33 149 53
Source: Bhattacharya et.al., 2017
A key benefit of pulses cultivation is their ability to fix atmospheric nitrogen, thus
improving soil fertility. Not only do pulses discharge greater and different types of amino
acids, but the plant residues left after harvesting pulse crops also improve biochemical
composition of the soil. Hence, pulses production can promote sustainability of the
farming systems.
3.2 Consumption of Pulses

In the coming decades, the producers globally will need to feed an additional 3 billion
people and a large part of that population would be from the developing regions of the
world. The global demand for pulses has been increasing. The table 3.2 summarises the
protein intake in developing countries where pulses contribute more than 10% of per
capita total protein intake. The data shows that India’s protein intake is 13%.
Table 3.2: Developing Countries where Pulses Contribute more than 10% of Per Capita Total Protein
Intake
Countries Percentage Countries Percentage
Burundi 55% Mauritania 13%
Rwanda 38% Sierra Leone 13%
Uganda 20% India 13%
Kenya 20% Brazil 13%
Comoros 18% Trinidad and Tobago 12%
Haiti 18% Mozambique 12%
Ertirea 18% Cameroon 12%
Nicaragua 16% D.R. Korea 11%
Cuba 16% Guatemala 11%
Countries Percentage Countries Percentage
Niger 15% Mexico 10%
Ethiopia 15% Togo 10%
Malawi 15% Belize 10%
Angola 15% Paraguay 10%
Tanzania 14% Botswana 10%
Source: FAO (2005-07)
As mentioned previously, in India, the rate of an increase in the production of pulse

has been less than the increase in the population. The declining per capita production
of pulses (14 kg in mid-1990s to 12 kg in 2008) has been compensated by the increasing
imports of the commodity. With the declining production globally, and rising prices both
in domestic as well as international markets, the per capita availability of pulses has
continued to deteriorate.
The declining per capita consumption of cereal and pulses has led to their declining
importance as a source of calories and proteins in diets, which according to NSSO data, has
come concomitantly with a decline in average per capita calorie and protein consumption
in rural India and a stagnant level of those nutritional indicators for urban India (Deaton
and Dreze, 2009).
The government policy initiatives such enhancing production through National Food
Security Mission (NFSM) and higher minimum support prices (MSP) were considered to
have played a positive role in encouraging production (Bhattacharya et.al., 2017). However,
a breakthrough in technological innovations are highly required to reduce the crop loss
and to improve productivity.
The below sections will discuss the major production technologies of pulses, thereby
highlighting the growing importance for sustainable production practices in agriculture.
Major varieties of pulses would be highlighted and towards the end of the chapter
consumption pattern of various pulses would be discussed.
3.3 Production Technologies

Some of the major constraints in the production of pulses in India have been the
unfavourable weather conditions, the abnormal soil conditions, agro-economic
constraints, availability of better input quality, pests and diseases, technological and
infrastructural constraints, blue-bull trouble and credit, marketing and policy constraints
(Singh et.al., 2015).
Improved Varieties or Hybrids

Over the years there has been less research on pulses than on cereals. From the studies
that have been conducted, it was found that yields in pulses in India have been lower in
comparison with the other countries. For increasing yields in pulses it is important to
encourage GM technologies. In pulses, breeding is limited both by the narrow genetic
base of varieties and their high susceptibility to pest and disease attacks. Indian scientists
have already made progress in this area. GM pod borer insect pest-resistant chana and
arhar have been developed by Assam Agricultural University and ICRISAT respectively
(Subramanian, 2016).
Further, there is an urgent need to broaden the genetic base by strengthening pre-breeding
of pulses and developing core sets of germplasm, harnessing hybrid potential through
the development of CMS (cytoplasmic nuclear male sterility) based hybrids in pigeon
pea, mapping and tagging of genes and marker-assisted selection for resistance to insect
pests and diseases, gene pyramiding for stable resistance, development of transgenics in
chickpea, and genomic research for understanding the structure and function of genes
(Ali and Gupta, 2012).
Vertical Approach
Singh et. al., (2015) has detailed the possible methods and techniques which ensure an
increase in production without an expansion in the cropping area. The first in vertical
approach is the promotion of sequential cropping and intercropping of pulses. A number
of intercropping systems for pulses is developed by Agricultural Research Stations.
Farmers in rain-fed states such as Gujarat, Madhya Pradesh, Maharashtra, Karnataka
etc. are familiar with these practices and have been practising them in traditional ways.
However, it should be ensured that the seeds of pulse varieties that are recommended for
intercropping are available to the farmers. Demonstrations must be made with suitable
seeding devices and seed mini-kits of pulses must be provided to the farmers.
Table 3.3: Promising Intercropping for Different Pulse Producing States

Intercropping Systems States
Soybean + Pigeon pea Madhya Pradesh, Maharashtra
Pearl Millet / Sorghum + Pigeon pea Karnataka, Andhra Pradesh, Gujarat, Maharashtra
Groundnut + Pigeon pea Gujarat
Groundnut / Sorghum / Pearl Millet + Urad bean Bihar, Maharashtra, Madhya Pradesh, Karnataka
Mung bean / Cowpea Gujarat, Uttar Pradesh, Rajasthan
Uttar Pradesh, Maharashtra, Karnataka, Andhra
Sugarcane + Cowpea / Mung bean / Urad bean
Pradesh, Tamil Nadu
Punjab, Haryana, Madhya Pradesh, Gujarat,
Cotton + Mung bean / Urad bean /Cowpea
Andhra Pradesh, Maharashtra
The second in the vertical approach is the seed replacement or multiplication strategy.
The major constraint related to the promotion of quality seeds is the availability of better
varieties of seeds in adequate quantities at appropriate times. The Seed Replacement
Rate (SRR) estimated for the year 2006-07 was a mere 10.41%. However, through efforts
by various Government schemes and programmes such as Integrated Scheme of Pulses,
National Food Security Mission (NFSM), Seed Village Programme etc. the SRR was
successfully raised to 22.5% by 2010-11.
The third in the vertical approach is the balanced nutrient management. Through various
studies, it was found that Sulphur application at the rate of 20-40 kg/hectare at the time of
sowing and the application of Zinc Sulphate at the rate of 25-50 kg/hectare once in every
two years effectively addresses the problem of deficiency of these compounds in the pulses.
It was also noted that by the application of these compounds, crop productivity could be
maximised along with the efficient use of water. Most of the Nitrogen requirement was
met through biological N-fixation.
Mechanization in pulses comes next in the vertical approach. Mechanisation of soils

is very important to raise the productivity of crops. Adoption of deep ploughing, ridge
planting, line sowing, inter-culture operations along with mechanization contributes
to the timeliness of operations, reduces cost of production and improves resource use
efficiency (Singh et.al., 2014 a and Patel et.al., 2014). Custom hiring of the machines,
especially for farmers with small holdings proves to be a good option for increasing
farm mechanisation. In this context, example of ‘Haldhar’ program of Madhya Pradesh
Government is a good practice that subsidizes the farmers to the extent of Rs. 2000 per
hectare for deep ploughing of their lands (Anonymous, 2013 and Singh et.al., 2013a).
The last in the vertical approach is the expansion of irrigation services by the use of resource
conservation technologies. The use of sprinkler irrigation not only saves irrigation water
but also expands the area under irrigation. Further, another method, drip irrigation has
also gained attention worldwide. Fertigation has also proved fruitful for widely spaced
crops such as pigeon pea.
Horizontal Approach
Under the horizontal approach, Singh et.al., (2015) has discussed about the efficient
utilisation of rice fallow lands and replacement of low productivity crops with pulses.
After the cropping of kharif rice, the area left un-cropped is estimated to be around 11.65
million hectares. Bihar, Madhya Pradesh, Chhattisgarh, Odisha and Eastern parts of Uttar
Pradesh are the states that consist of such areas. Depending upon the soil type and depth,
around 25 percent of such area has the potential of supporting a rabi pulse. Hence, nearly
3 to 4 million hectares of additional area can be brought under rabi pulses. Assuming an
average productivity of 600 kg/hectare, the same area can produce 1.8 to 2.4 million tons
of pulses. Thus, necessary technological back up in terms of suitable short varieties must
be made (Journal of Agrisearch, Vol 2, No. 2). Further, mustard, barley and wheat could be
replaced by rabi pulses such as lentils and chickpeas. Harvested rain-water could be used
for rabi crop establishment (Anonymous, 2013 and Singh et.al.,, 2013a).
Rhizobium Inoculation
Jeswani and Baldev (1990) have pointed out that the pulses have a unique property of
association with Rhizobium which lives freely in soils. The Rhizobium enters the root
hair of pulse crops and fixes atmospheric nitrogen. Artificial inoculation with an efficient
Rhizobium culture and in this way ensures the availability of maximum quantity of
symbiotic nitrogen to the crop. Rhizobium inoculation increases yields. Various studies
have suggested that up to 100 percent of the nitrogen requirement of the pulse crops could
be met by providing efficient strains of Rhizobium coupled with sound agro-economic
services. After meeting their own requirements, pulses leave behind sufficient residual
nitrogen for the succeeding crop. Keeping this in mind, many microbiological laboratories
have started producing Rhizobium culture and substantial funds are being provided to
build up such laboratories.
Integrated Pest Management

Pulse crops are attacked by more than one disease or pest at a time, which makes a need
for multiple disease resistant varieties a must. Reddy (2009) discusses that Integrated
Pest Management (IPM) is essentially a farmer activity of using one or more than one
management options to reduce pest population below the economic injury level, while
ensuring productivity and profitability of the entire farming system. Cropping systems
involving crop rotation or intercropping of non-host and host crops, different agro-
economic practices like the use of solar energy by summer ploughing preceding Kharif
pulses are some of the cost effective components of IPM. However, this process takes time
to yield results and also needs a community approach which makes some of the farmers
hesitant to use it.
Post-Harvest Technology
Post-Harvest losses account for nearly 9.5 percent of the total production of pulses. And
among the post-harvest operations, storage operations are responsible for the maximum
loss (7.5%). Further losses are caused due to processing (1%), threshing (0.5%) and
transportation (0.5%) (Deshpande and Singh, 2001). Processing efficiency in dal mills
must be increased. Over the years, the net availability of end products in modern dal
mills has been increased to 70-75 percent compared to 65-66 percent in traditional dal
mills. Appropriate storage structures must be popularised. Propagation of mini-dal mills
through the formation of pulses producers and processors associations is one of the
components of NFSM, which will not only decrease post-harvest losses but also increase
rural employment (Reddy, 2009).
3.4 The Need for Sustainable Practices
Despite a considerable fall in the global percentage of people employed in agriculture
over the years, the contribution of greenhouse gas emissions from agriculture was nearly
25 percent of the total greenhouse gas emissions in the year of 2014 (The Guardian, July
2014).
Further, with the ever increasing population in the already overpopulated nation, it
has become very important now more than ever that we look towards more sustainable
agricultural options. Sustainable agriculture works in harmony with the nature and not
against it. Sustainable agriculture is the need of the hour as it reduces the use of energy,
contributes to the conservation of water and nourishes the soil among other things.
By ensuring use of alternate or renewable sources of energy, using crop rotation or crop
diversity, making use of natural pesticides and by better water management, sustainability
in farming techniques could be achieved.
3.5 Major Varieties

The cultivation of pulses is distributed between two major seasons, viz; Kharif and Rabi.
There are at least 10 important pulse crops grown in India.
3.5.1 Rabi Pulses

a) Chickpeas
Chickpeas or Chana Dal, also known by the names of garbanzo bean, ceci bean, sanagalu,
hummus and Bengal gram is the most important pulse crop grown in the country. Currently,
it is grown in India, Middle East and various parts of Africa. The major chickpea-growing
states in India are Madhya Pradesh, Uttar Pradesh, Rajasthan, Haryana and Maharashtra.
The low rainfall period in some semi-arid regions, like parts of Haryana and Rajasthan,
proves to be insufficient in providing enough residual moisture during October and
March to sustain a crop of chickpea. Yet, the farmer takes the risk in growing chickpea
in alternate years in a single crop rotation with millets and kharif pulses (Jeswani and
Baldev, 1990).
Drought-tolerance capacity of chickpea finds expression in crop mixtures which are

common in many parts of the country. Unirrigated wheat is commonly grown mixed
with chickpea. When the weather is too dry for wheat, the chickpea compensates for loss
in wheat yields. Hence, the combination of chickpea and wheat is a safeguard against
unfavourable weather conditions.
b) Peas
In the Indo-Gangetic plains, Peas, also called Matar, are one of the most important pulse
crops and about 90 percent of its area and production is confined to Uttar Pradesh.
c) Lentils
Lentils or Masur Dal are mostly grown in Uttar Pradesh, Madhya Pradesh, Maharashtra
and West Bengal. Lentils are also rain-fed crops and grown under same circumstances as
that of chickpea.
d) Lathyrus
Another popular rabi pulse crop is Lathyrus or Khesari. Lathyrus is a significant crop of
the Indo-Gangetic plains and about 80 percent of it is grown in Bihar, Madhya Pradesh,
Maharashtra and West Bengal. This crop needs very little field preparation and has the
ability to withstand extreme moisture-stress conditions and hence, is highly preferred
by the farmers. Farmers also prefer Lathyrus as its moisture requirement is much lesser
than that of chickpeas and Lentils.
3.5.2 Kharif Pulses

a) Pigeon pea
Pigeon peas or Tur Dal are the second most important pulse crop grown in India. The six
states viz., Maharashtra, Uttar Pradesh, Madhya Pradesh, Karnataka, Gujarat and Andhra
Pradesh together contribute to nearly 85 percent of the total area and production of the
crop.
In spite of its long duration and the attainment of grain-development stage long after the
rainy season is over, farmers prefer pigeon pea especially in the low- rainfall areas as the
crop is drought-tolerant. The long duration of pigeon pea in north India also makes it
admirably suitable for mixed cropping and intercropping with sorghum or pearl millet or
maize (Jeswani and Baldev, 1990).
b) Green gram
Green gram or Mung Dal is the third most important pulse crop in India. Yield of green
gram is only half of that of pigeon pea and chickpea. It is mainly grown as a Kharif crop in
Maharashtra and Andhra Pradesh and in Orissa as a Rabi crop. Other states growing green
gram are Madhya Pradesh and Rajasthan.
c) Black gram
Black gram or Urad Dal is mostly grown in Madhya Pradesh, Maharashtra, Tamil Nadu,
Uttar Pradesh and Rajasthan during Kharif season and in Andhra Pradesh and West Bengal
in the Rabi season. However, low yield of Green gram has restricted its cultivation to fields
which are relatively poor in fertility status or moisture to suit other crops (Jeswani and
Baldev, 1990).
d) Cowpea
Cowpea also called Lobiya in Hindi is a dual purpose crop grown either for grain or for
the fodder. Though mainly grown as a Kharif crop, cowpea has become a very important
summer crop. It is mainly grown in Kerala, West Bengal and Punjab.
e) Horse gram
Horse gram or Chana Dal is usually grown in the dry and upland areas of the peninsular
and eastern states of India such as Orissa, Karnataka, Andhra Pradesh, Maharashtra,
Madhya Pradesh and Tamil Nadu.
f) Moth bean
Moth bean or Keet Sem is one of the most drought-tolerant crops and is primarily grown in
the dry western and central India. Rajasthan is the major contributor of this crop.
Chapter National Food Security
04 Mission and Pulses
Production
4.1 Introduction
The National Food Security Mission (NFSM) was launched by the Government of India
during 2007-08 at the beginning of the 11th five-year plan. The major objective of the
programme was to address the issue of food security by devising programmes targeted to
escalate production of rice, wheat and pulses by 10, 8 and 2 million tonnes respectively by
the end of the 11th five-year plan. The NFSM was initially implemented in 482 districts of
19 States comprising of 144 districts under Rice in 16 States, 142 districts under Wheat in 9
States and 468 districts under Pulses in 16 States. The scheme continued during the twelfth
five-year plan with a new set of targets. The objective of this scheme was the distribution
of revamped technologies and farm management practices, thereby bridging the yield
gap of the food grains.
The NFSM had a two pronged strategy. First strategy was to expand the area, and the
second strategy was to enhance the productivity by bridging the gap between the actual
and potential yield. However, the area expansion was confined to mainly wheat and pulses
(Manjunatha and Kumar, 2015). In order to augment productivity, the NFSM had adopted
several measures including 1) quality seed production; 2) emphasising integrated nutrient
management and integrated pest management; 3) Promotion of new technologies; 4)
restoring soil fertility; 5) improved farm implements etc. As a result a total amount of Rs
4500 crores have been spent under NFSM during the 11th five year plan (Manjunatha and
Kumar, 2015).
Other objectives of the scheme include restoring soil fertility and productivity at the
individual farm level, creation of employment opportunities, enhancing farm profits,
promotion and extension of improved technologies such as Integrated Nutrient
Management.
During the eleventh five-year plan, NFSM was implemented in 482 districts of 19 states.
NFSM-Rice was implemented in 144 districts of 16 states, NFSM-Wheat in 142 districts of 9
states and NFSM-Pulses in 468 districts of 16 states. The mission when launched had five
components, which were – (i) NFSM-Rice, (ii) NFSM-Wheat, (iii) NFSM-Pulses, (iv) NFSM-
Coarse cereals and (v) NFSM-Commercial crops.
Rashtriya Krishi Vikas Yojana (RKVY) programme was also introduced during the same
period when NFSM was introduced. Apart from NFSM, several state and centrally sponsored
programmes were also added impetus to the food security promotion programmes. As a
joint results of all these the wheat production during the end of the 11th Five Year Plan
increased by 19.1 million tonnes, paddy production increased by 12.1 million tonnes, and
pulses production by 3 million tonnes as compared to the year 2006-07.
Figure 4.1: States covered by NFSM for Pulses
Source: NFSM
4.2 NFSM-Pulses Districts
Table 4.1: Districts Covered (Identified) Under National Food Security Mission (2017-18)
S. No. State NFSM-Rice NFSM-Wheat NFSM-Pulses NFSM-Coarse
1 Andhra Pradesh 5 - 13 6
2 Arunachal Pradesh 10 - 17 17
3 Assam 13 - 27 4
4 Bihar 15 10 38 11
5 Chhattisgarh 13 - 27 9
6 Goa - - 2 -
7 Gujarat 2 5 26 8
8 Haryana - 7 21 5
9 Himachal Pradesh 2 11 12 12
10 Jammu & Kashmir 8 8 22 22
11 Jharkhand 4 - 24 11
12 Karnataka 7 - 30 11
13 Kerala 1 - 14 1
14 Madhya Pradesh 8 16 51 16
15 Maharashtra 8 3 33 8
16 Manipur 9 - 9 9
17 Meghalaya 7 - 11 11
18 Mizoram 6 - 8 8
19 Nagaland 11 - 11 11
20 Odisha 8 - 30 6
21 Punjab - 12 22 3
22 Rajasthan - 14 33 12
23 Sikkim 2 - 4 4
24 Tamil Nadu 8 - 30 10
25 Telangana 4 - 9 6
26 Tripura 8 - 8 8
27 Uttar Pradesh 23 31 75 20
28 Uttarakhand 5 9 13 13
29 West Bengal 7 - 18 3
Total 194 126 638 265
Source: Ready Reckoner (NFSM Cell, Crops Division), DAC&FW
Table 4.1 elucidates the districts covered under rice, wheat, pulses and coarse cereals
under the National Food Security Mission in the year 2017-18. The table shows that
currently, a total of 638 districts are covered under NFSM-Pulses and the mission covers
30, 51 and 33 districts in Karnataka, Madhya Pradesh and Maharashtra respectively.
4.3 Major Interventions
Some of the major interventions that were undertaken to improve the productivity of
pulses under National Food Security Mission are detailed here.
Improved package of pulses are being provided. Provision of high yielding varieties of
pulses has been done and seeds are provided at 25 rupees per kg or 50 percent of the cost,
whichever is less. Further, farm machineries/tools such as manual sprayers, chisellers,
seed drills, multi crop planters, power weeders, etc., are being provided at half the actual
cost. Farmers have access to better and improved water application tools along with plant
protection measures. Soil ameliorants are also being provided such as Gypsum, Bentonite
sulphur, liming materials and some of the bio-fertilisers. Farmers are also being given
cropping system-based training.
Table 4.2 lists the districts covered under the National Food Security Mission – Pulses in
the states of Karnataka, Madhya Pradesh and Maharashtra.
Table 4.2: Districts Covered under NFSM-Pulses in the Study States
States Districts
Karnataka Bagalkot Haveri
(30 Districts) Bangalore (Rural) Gadag
Bangalore (Urban) Gurbarga
Belgaum Koppal
Bellary Kodagu (Coorg)
Bidar Kolar
Bijapur Mandya
Chamarajanagar Mysore
Chikballapur Raichur
Chikmagalur Ramnagar
Chitradurga Shimoga
Dakshin Kannada Tumkur
Davangiri Udupi
Dharwad Uttar Kannada
Hassan Yadgiri
Madhya Pradesh Agar Mandla

(51 Districts) Alirajpur Mansaur
Anup Pur Morena
Ashok Nagar Narsinghpur
Balaghat Neemach
Barwani Panna
States Districts
Betul Raisen
Bhind Rajgarh
Bhopal Ratlam
Burhanpur Rewa
Chhattarpur Sagar
Chhindwara Satna
Damoh Sahdol
Datia Sehore
Dewas Seoni
Dhar Shajapur
Dindori Sheopurkalan
East Nimar (Khandwa) Shivpuri
Gwalior Sidhi
Guna Singrauli
Harda Tikamgarh
Hoshangabad Ujjain
Indore Umaria
Jabalpur Vidisha
Jhabua West Nimar (Khargaon)
Katni
Maharashtra Ahmednagar Nanded

(33 Districts) Akola Nandurbar
Amravati Nasik
Aurangabad Osmanabad
Beed Parbhani
Bhandara Pune
Buldhana Raigad
Chandrapur Ratnagiri
Dhule Sangli
Gadchiroli Satara
Gondia Sindhudurga
Hingoli Sholapur
Jalgaon Thane
Jalna Wardha
Kolhapur Washim
Latur Yavatmal
Nagpur
Source: nfsm.gov.in
4.4 NFSM in Maharashtra
National Food Security Mission – Wheat, National Food Security Mission – Rice and
National Food Security Mission – Pulses, all are being implemented in the state of
Maharashtra currently. As of 2014-15, Maharashtra covered more than 14 percent of the
total area (nearly 3.5 million hectares) and almost 12 percent of the total production of
pulses in the country.
The area production and yield of pulses in both NFSM and non-NFSM districts are given
in Tables 4.3 and 4.4. In Maharashtra, Yavatmal is the district where NSFM has been
implemented since the advent of this scheme, while Dhule has been selected as the non-
NFSM district for the period starting 2007 to 2009. Post 2009, Dhule was also covered under
this scheme.
The data shows that area under the cultivation of pulses was higher in Yavatmal in both
the years. However, despite a decline in production in Yavatmal in 2008, the average yield
was much higher in the district in comparison with Dhule.
Table 4.3: Area, Production and Yield of Pulses in NFSM District - Yavatmal
Year Area(000 Ha) Production(000 Tonnes) Yield(Kg/Ha)

2007-2008 241.86 224.81 929
2008-2009 160.23 89.05 556
Source: National Food Security Mission, Ministry of Agriculture and Farmers Welfare
Table 4.4: Area, Production and Yield of Pulses in non-NFSM District - Dhule

2007-2008 79.39 59.70 752
2008-2009 45.93 19.31 420
4.5 NFSM in Karnataka

National Food Security Mission – Rice and National Food Security Mission – Pulses and
National Food Security Mission – Coarse Cereals are being implemented in the state of
Karnataka currently.
Karnataka is the fifth largest producer of pulses in India. In 2015-16, Karnataka’s share of
production was nearly 1.14 million tonnes in the total pulse production in the country.
in Tables 4.5 and 4.6. In Karnataka, the NFSM district was Chitradurga and non-NFSM
district was chosen as Mandya. From the data, it can be observed that in Chitradurga,
the average yield is marginally higher than in Mandya. In the period of two years, the
area under cultivation in both the districts has remained nearly unchanged. After 2009,
Mandya also came under the ambit of the scheme.
Table 4.5: Area, Production and Yield of Pulses in NFSM District - Chitradurga
2007-2008 37.44 26.38 705
2008-2009 37 19.17 518
Table 4.6: Area, Production and Yield of Pulses in non-NFSM District - Mandya

2007-2008 35.18 21.58 610
2008-2009 32.16 13.74 427
4.6 NFSM in Madhya Pradesh

National Food Security Mission – Rice, National Food Security Mission – Wheat and
National Food Security Mission – Pulses are being implemented in the state of Madhya
Pradesh. Madhya Pradesh is the largest producer of pulses in India. It accounts for
nearly 5.3 million tonnes (2015-16) of total pulses produced in the nation. Major districts
producing pulses in Madhya Pradesh are – Dewas, Chhindwara, Narsinghpur, Raisen, etc.
in Tables 4.7 and 4.8.
From the data, it can be seen that there is a significant difference in the average yield of
both the districts. While area under the cultivation of pulses in Dewas increased slightly
in the second year, it decreased marginally in Dindori.
Hence, a huge difference in the average yields of both the districts was witnessed.
Table 4.7: Area, Production and Yield of Pulses in NFSM District - Dewas
2007-2008 110.27 113.01 1025
2008-2009 115.76 127.47 1101
Table 4.8: Area, Production and Yield of Pulses in NFSM District - Dindori

2007-2008 56.71 13.58 239
2008-2009 52.28 16.07 307
Table 4.9 provides a brief summary of interventions and patterns of assistance provided
to the farmers in the implementation of National Food Security Mission – Pulses during
2017-18.
Table 4.9: Action Plan for Implementation of NFSM-Pulses in all States during 2017-18
S.No. Interventions Approved Assistance (in Rupees)
1 Demonstrations on improved technologies
Arhar 7500 per ha
Moong 7500 per ha
Urad 7500 per ha
Gram 7500 per ha
Lentil 7500 per ha
Other 7500 per ha
2 Production and Distribution of HYV seeds 2500/quintal or 50% of cost (whichever less)
3 Integrated Nutrient Management
Micro-Nutrients 500/ha or 50% of cost (whichever less)
Gypsum/80% WG Sulphur 750/ha or 50% of cost (whichever less)
Lime 1000/ha or 50% of cost (whichever less)
Bio-Fertilisers 300/ha or 50% of cost (whichever less)
4 Integrated Pest Management
Distribution of PP Chemicals 500/ha or 50% of cost (whichever less)
Weedicides 500/ha or 50% of cost (whichever less)
5 Resource Conservation Technologies/Tools
Power Knap Sack Sprayers 3000/unit or 50% of cost (whichever less)
Manual Sprayers 600/unit or 50% of cost (whichever less)
Zero Till Seed Drills 15000/unit or 50% of cost (whichever less)
Multi-Crop Planters 15000/unit or 50% of cost (whichever less)
Seed Drills 15000/unit or 50% of cost (whichever less)
Zero Till Multi Crop Planters 15000/unit or 50% of cost (whichever less)
Ridge Furrow Planters 15000/unit or 50% of cost (whichever less)
Rotavators 35000/unit or 50% of cost (whichever less)
Chilseller 8000/unit or 50% of cost (whichever less)
Laser Land Levellers 1.5 lakh or 50% of cost (whichever less)
S.No. Interventions Approved Assistance (in Rupees)
Tractor Mounted Sprayers 10000/unit or 50% of cost (whichever less)
Multi Crop Threshers 40000/unit or 50% of cost (whichever less)
6 Efficient Water Application Tools
Sprinkler Sets 10000/ha or 50% of cost (whichever less)
Pump Sets 10000/unit or 50% of cost (whichever less)
Pipe for carrying water from source to field 20/meter or 50% of cost (whichever less)
Mobile Rain Gun 15000/unit or 50% of cost (whichever less)
Source: nfsm.gov.in/notifications
Chapter
Socio-Economic Profile of
05 the Sample Households
5.1 Introduction
The present chapter provides an overview of socio-economic profile of the sample
households. Considering the heterogeneous nature of the country and the study region,
there were considerable differences across the states in terms of the profile of the
households. The sections below undertake a discussion of the socio-economic profile
of the total sample size as well as a detailed socio-economic profile at the district level.
A detailed socio-economic profile at the district level is undertaken to understand the
disparities in terms of various social, economic and institutional factors across different
States.
Household survey was conducted in three districts drawn from three states-Karnataka,
Madhya Pradesh and Maharashtra. The major districts producing chickpea and pigeon
pea are identified from each state. Accordingly, Gulbarga is selected from Karnataka,
Narsinghpur is selected from Madhya Pradesh and Wardha is selected from Maharashtra.
A random sample of chickpea and pigeon pea producing farmers are selected from each
district. The total number of households surveyed was 572. Subsequently 195 farmers
are selected from Gulbarga, 198 farmers are selected from Wardha and 179 farmers are
selected from Narsinghpur. The total sample consisted of 482 pigeon pea farmers and
316 chickpea farmers and out of which 228 farmers were cultivating both chickpea and
pigeon pea. In our sample, pigeon pea farmers were 189 from Gulbarga (Karnataka), 145
from Wardha (Maharashtra), 149 from Narsinghpur (Madhya Pradesh). Chick pea farmers
were 40 from Gulbarga (Karnataka), 102 from Wardha (Maharashtra) and 175 from
Narsinghpur (Madhya Pradesh). Similarly, those who are cultivating both Chickpea and
pigeon pea were 34 from Gulbarga (Karnataka), 49 from Wardha (Maharashtra), 145 from
Narsinghpur (Madhya Pradesh) (see table 5.1).
Table 5.1: Households According to Type
Narsinghpur
Gulbarga Wardha (Madhya
Farmer type (Karnataka) (Maharashtra) Pradesh ) Total
Chickpea
Table farmers According to Type
5.1: Households 40 102 175 317
Pigeon Pea farmers 189 145 149
Narsinghpur 483
Gulbarga Wardha
Chickpea
Farmer typeand pigeon (Madhya Total
(Karnataka) (Maharashtra)
pea farmers 34 49 Pradesh145
) 228
Chickpea farmers 40 102 175 317
Source: Survey Data
Pigeon Pea farmers 189 145 149 483
Chickpea and pigeon pea farmers 34 49 145 228
Agriculture was the main occupation and livelihood strategy for most of the farm households
Source: Survey Data
in the study districts. Farming was the main occupation for 540 households interviewed. This
Agriculture was the main occupation and livelihood strategy for most of the farm
constitutes around 95% of the total households interviewed. Out of which farming was main
households in the study districts. Farming was the main occupation for 540 households
occupation for
interviewed. around
This 89% ofaround
constitutes the households in total
95% of the Gulbarga (Karnataka),
households 100% ofOut
interviewed. households
of which
in Wardha
farming (Maharashtra),
was 94% for
main occupation of around
households
89%inofNarsinghpur (Madhya
the households Pradesh)
in Gulbarga (see figure
(Karnataka),
100%
5.1). of households in Wardha (Maharashtra), 94% of households in Narsinghpur (Madhya
Pradesh) (see figure 5.1).
Figure5.1:
Figure 5.1: Percentage
Percentage of Households
of Households with Farming
with Farming as Main Occupation
as Main Occupation (in %) in Percentage
100
100
98
96 94
94
92
89
90
88
86
84
82
Karnataka Maharashtra Madhya Pradesh
Source: Survey Data

Source: Survey Data
Majority of the farm households interviewed were either semi medium farmers or medium
farmers.
Majority Marginal
of the farmfarmers were interviewed
households around 45%, small
were farmers
either semi around
medium36%, semi
farmers or medium
medium
farmers around 16%, medium farmers around 3% and large famers were less than 1% (see
farmers. Marginal farmers were around 45%, small farmers around 36%, semi-medium
figure 5.2). Marginal and small farmers were the highest in Wardha (Maharashtra) and
farmers around
Gulbarga 16%, medium
(Karnataka) whereasfarmers
medium around 3% and
and large large famers
farmers were less
were highest in than 1% (see
Narsinghpur
figure 5.2).
(Madhya Marginal
Pradesh) (seeand small
table 5.2). farmers were the highest in Wardha (Maharashtra) and
43
Gulbarga (Karnataka) whereas medium and large farmers were highest in Narsinghpur
(Madhya Pradesh) (See table 5.2).
Figure5.2:
Figure 5.2: Households
Households According
According to FarmtoSize
Farm Size
(in %) (in%)
0.40 35.49%
33.39%
0.35
0.30
0.25
0.20 17.48%
0.15 10.49%
0.10
3.15%
0.05
0.00
Marginal Small Semi medium Medium Large
Source: Survey Data

Source: Survey Data
Table 5.2: Percentage of Households According to Farm Size in Different States
Table
State 5.2: Percentage of Households According
Marginal Small to Farm
Semi Size in Different
medium Medium StatesLarge
Karnataka
State Marginal 6Small 21 medium
Semi 37
Medium Large30 7
Maharashtra
Karnataka 6 2 21 26 37 40 30 29 7 2
Maharashtra
Madhya Pradesh 2 2 26 4 40 22 29 49 2 24
Madhya
Total 3 17 33 35 10
Pradesh
Source: Survey Data
2 4 22 49 24
Total 3 17 33 35 10
As far as government schemes to promote pulses production, only 86% of households
Source: Survey Data
didn’t have any awareness of any such schemes. Among the total number of households
who had awareness, 84% of households were from Wardha (Maharashtra). The awareness
As far
was as government
lowest schemes
in Gulbarga to promote
(Karnataka) pulses production,
and Narsinghpur only Pradesh)
(Madhya 86% of households
(see figuredidn’t
5.3).
This
have also means 33%
any awareness of of
anytotal
suchhouseholds interviewed
schemes. Among from
the total Wardha
number (Maharashtra)
of households who had
had
information about government schemes to promote the cultivation of pulses (see figure
awareness, 84% of households were from Wardha (Maharashtra). The awareness was lowest
5.3). The percentage of households who had such information was very negligible in other
in Gulbarga (Karnataka) and Narsinghpur (Madhya Pradesh) (see figure 5.3). This also means
two states.
33% of total households interviewed from Wardha (Maharashtra) had information about
government schemes to promote the cultivation of pulses (see figure 5.3). The percentage of
households who had such information was very negligible in other two states.
44
Figure 5.3: Percentage Share of Households with Awareness in any Government
Schemes
33.33
Figure
35 5.3: Percentage Share of Households with Awareness in any Government
SchemesPercentage Share of Households with Awareness in any Government Schemes
Figure 5.3:
30
33.33
25
35
20
30
15
25
10 2.56
4.47
20
5
15
0
10 2.56
4.47
5 Survey Data
Source:
0
Karnataka
Farm size wise MaharashtraschemesMadhya
awareness of government showed Pradesh
that the awareness was the highest
amongSurvey
Source: theData
medium and semi medium farmers. The percentage of farmers with such
Source: Survey Data
awareness
Farm among
size wise medium
awareness and semi schemes
of government medium showed
farmersthat
were
the around 17%
awareness was and
the 16%
respectively.
highest amongWhereas the awareness
the medium was the farmers.
and semi medium lowest among marginal offarmers
The percentage farmersfollowed
with by
Farm size wise awareness of government schemes showed that the awareness was the highest
such awareness among medium and semi medium farmers were around 17% and 16%
large and small farmers.
among the Whereas
respectively. mediumthe
and semi medium
awareness farmers.
was the lowest The
among percentage
marginal farmers offollowed
farmersbywith such
large and small
awareness farmers.
among medium and semi medium farmers were around 17% and 16%
Figure 5.4: Households with Government Scheme Awareness According to Farm Size
respectively.
Figure
(in%) Whereas
5.4: Households the awareness
with Government was
Scheme the lowest
Awareness among
According marginal
Size (in%) farmers
followed by
to Farm
large and small farmers.

18 17
16
16
Figure 5.4: Households with Government Scheme Awareness According to Farm Size
(in%)
14
12
9 17
10
18 8
16
8
16
6
6
14
4
12
2 9
10 8
0
8
Marginal
6 Small Semi medium Medium Large
6
Source: Survey Data
Source:
4 Survey Data
2 45
0
44 Marginal MARKETSSmall
PRODUCTION, AND TRADE: A Semi medium
DETAILED Medium
ANALYSIS OF FACTORS Large
AFFECTING PULSES PRODUCTION IN INDIA
Note that medium and large farmers were more diversified in terms of crop cultivation (see
figure 5.6). The crop diversification by large farmers can also be a reason why they were not
paying
Note much
that mediumattention to the
and large government
farmers schemes
were more to promote
diversified pulses
in terms production.
of crop Around
cultivation (see
figure
77% of 5.6).
theThe crop diversification
households in the totalbysample
large farmers can also be
had diversified a reason
crop why they
cultivation. The were
crop
not paying much
diversification wasattention
the highest to the government
among the sampleschemes to promote
households pulses(Maharashtra)
from Wardha production.
Around 77% of the households in the total sample had diversified crop cultivation. The crop
and lowest among the sample households from Gulbarga (Karnataka) (see figure 5.5).
diversification was the highest among the sample households from Wardha (Maharashtra)
and lowest among the sample households from Gulbarga (Karnataka) (see figure 5.5).
Figure5.5:
Figure 5.5: Crop
Crop Diversification
Diversification State
State Wise Wise (in%)
(in%)
100
94
100
90
80
70
60
50 39
40
30
20
10
0
Source:Survey
Source: Survey
DataData
The crop diversification was lowest among the marginal farmers in the sample households
The highest
and crop diversification
among the mediumwas lowest
and among the marginal
large farmers farmers
(see figure 5.6).inThe
thecrop
sample households
diversification
by
andsmall andamong
highest medium farmers and
the medium were more
large or less(see
farmers similar.
figure 5.6). The crop diversification by
Figure 5.6:
Figure Crop Diversification According to Farm
(in%) Size (in%)
small 5.6:
and Crop Diversification
medium According
farmers were moreto orFarm
less Size
similar.
86 88
90
80 70 72
70
60
50
39
40
30
20
10
0
Source:
Source: Survey
Survey DataData 46
Not only the awareness, even the knowledge about new production techniques were highest
among the sampled households from Wardha (Maharashtra) (65%). The percentage of
Source: Survey Data
households with awareness of new production technique among the sample was only 33%.
households with awareness of new production technique among the sample was only
The knowledge
33%. was lowest
The knowledge in Gulbarga
was lowest (Karnataka).
in Gulbarga The knowledge
(Karnataka). in Narsinghpur
The knowledge in Narsinghpur
(Madhya Pradesh)
(Madhya andand
Pradesh) Gulbarga (Karnataka)
Gulbarga were 28%
(Karnataka) and28%
were 5% respectively (See figure 5.7).
and 5% respectively (see figure
5.7).
Figure
Figure 5.7:
5.7: Percentage
Percentage of Farmers
of Farmers with with Knowledge
Knowledge aboutabout New Production
New Production Techniques
Techniques
65
70
60
50
28
40
30
20 5
10
0
Farm size wise knowledge about new production techniques among the sample households
Source:
Source: Survey
Survey Data
Data
were the highest among the medium and large farmers. The knowledge of production
Farm size wise
techniques wasknowledge
increasing about
as farmnew
sizeproduction techniques
increases (Se among
figure 5.8). But the
evensample households
then only 35-36%
were the highest
of medium among
and large the medium
farmers and large
had knowledge aboutfarmers. The knowledge
new production of production
techniques which was
47
techniques was increasing as farm size increases (see figure 5.8). But even then only
very less.
35-36% of medium and large farmers had knowledge about new production techniques
which was very less.
Figure5.8:
Figure 5.8: Farm
Farm Size Size
Wise Wise Knowledge
Knowledge about
about New New Production
Production Techniques (in%)
Techniques (in%)
40.00 36.67
35.47
34.03
35.00
30.00 26.00
25.00 22.22
20.00
15.00
10.00
5.00
0.00
Source: Survey Data

Source: Survey Data
The poor access to government extension services can be the reason for poor knowledge in
The poor access to government extension services can be the reason for poor knowledge
in government schemes or new production techniques. The households with access
to extension services were only 43% in the total sample households. The state wise
percentage of access to extension services in the sample households showed that
households in Wardha (Maharashtra) had greater access to extension services (78%). The
access to extension services was lowest among the households interviewed in Gulbarga
(Karnataka) (8%). The percentage of households with access to extension services in
Narsinghpur of Households
(Madhya Pradesh) was 43%with Contact
(see with Government Extension
figure 5.10).
Services
Figure 5.9: Percentage of Households with Contact with Government Extension Services
78
80
70
60 43
50
40
30
8
20
10
0
Source: Survey Data

Source: Survey Data
Farm size wise access to extension services among the sample households showed that
Farm
the size wise
access access toservices
to extension extension services
were among
highest the sample
for semi households
medium farmers showed thatthis
(82%) and the
access
was to extension
followed services
by medium were
and highest
large for semi
farmers, medium
50% and 48% farmers (82%)The
respectively. andaccess
this was
to
extension
followed byservices
medium were
andthe lowest
large for marginal
farmers, 50% and farmers (22%) (seeThe
48% respectively. figure 5.10).
access to extension
services were the lowest for marginal farmers (22%) (see figure 5.10).
Figure 5.10: Farm Size Wise Contact with Government Extension Services (in%)
90 82
80
70
60 50 48
50
40 32
30 22
20
10 PRODUCTION, MARKETS AND TRADE: A DETAILED ANALYSIS OF FACTORS AFFECTING PULSES PRODUCTION IN INDIA 47
0
followed by medium and large farmers, 50% and 48% respectively. The access to extension
services were the lowest for marginal farmers (22%) (see figure 5.10).
Figure
Figure 5.10:
5.10: Farm
Farm Size Contact
Size Wise Wise Contact with Government
with Government Extension
Extension Services (in%)Services (in%)
90 82
80
70
60 50 48
50
40 32
30 22
20
10
0
As far as the training received from government department or NGOs are concerned only
Source:
Source: Survey
Survey DataData
19% of the sample households had received any kind of training. Training received from
As far as the departments
government training received fromwere
or NGOs government department
also highest in Wardhaor NGOs are concerned
(Maharashtra) (35%) only
and
19% of the
lowest sample households
in Gulbarga (Karnataka)had(55). The 49
received any kindreceived
training of training.
wasTraining
16% omreceived from
Narsinghpur
government departments or NGOs were also highest in Wardha (Maharashtra) (35%)
(Madhya Pradesh) (see figure 5.12).
and lowest in Gulbarga (Karnataka) (55). The training received was 16% om Narsinghpur
(Madhya Pradesh) (see figure 5.12).
Figure5.11:
Percentage of Households
of Households withtoAccess
with Access to Training
Training
35
40
35
30
25
16
20
15
10 5
0
Source: Survey Data

Source: Survey Data
Interestingly, the size wise percentage of farmers who received training showed that large
farmers had received more training. The training was relatively higher for semi medium,
Interestingly,
medium and the size
large wise percentage
farmers as comparedof farmers who received
to marginal training
and small. The showed
trainingthat
waslarge
the
farmersfor
lowest had received
small more
farmers training.
(see The training was relatively higher for semi, medium,
figure 5.12).
medium and large farmers as compared to marginal and small. The training was the lowest
for small farmers (see figure 5.12).
Figure5.12:
Figure 5.12: Training
Training Received
Received bySize
by Farm Farm
WiseSize
(in%)Wise (in%)
25
25 22
21
20
15
11
10
6
0
Source: Survey Data

Source: Survey Data
The poor access to training, extension services information about government schemes
and new production techniques etc. were reflected in the information regarding
The poor access to training, extension services information about government schemes and
MSP received by households. In our sample, only 51% of the sample households had
new production
information techniques
about the MSP.etc.Information
were reflected in the information
regarding regarding
the MSP was MSP received
the highest in Madhyaby
households.
Pradesh In ourdue
possibly sample,
to theonly 51%share
highest of the
of sample
medium households
and large had information
farmers about the
in the sample by
Narsinghpur (Madhya
MSP. Information Pradesh).
regarding the MSPThe was
information was
the highest inthe lowest
Madhya in Gulbarga
Pradesh (Karnataka).
possibly due to the
Contact with extension services, access to training, knowledge of government schemes or
highest share of medium and large farmers in the sample by Narsinghpur (Madhya Pradesh).
new production techniques, crop diversification were also the lowest among the sample
The information was the lowest in Gulbarga (Karnataka). Contact with extension services,
households from Gulbarga (Karnataka). It shows that the disadvantage faced by all these
access
had to training,
a direct knowledge
link with the accessof to
government
information schemes or new
regarding production techniques, crop
MSP.
diversification
Despite havingwere also the
higher lowest
access to among the sample
training, households
extension servicesfrom
andGulbarga (Karnaka).
knowledge about
It shows thatschemes
government the disadvantage faced by all
and new production these had the
techniques, a direct link with
information the access
of MSP to
received
by households
information in Wardha
regarding MSP.(Maharashtra) were lower than that of Narsinghpur (Madhya
Pradesh) (see figure 5.14). In Wardha (Maharashtra) around 52% of the sample households
had information about MSP whereas in Narsinghpur (Madhya Pradesh) around 94% of
Despite having higher access to training, extension services and knowledge about
sample household had information about MSP. Again this could be partly due to the high
government
share schemes
of medium andand new
large production
farmers in thetechniques, the information
sample by Narsinghpur of MSPPradesh).
(Madhya received by
households in Wardha (Maharashtra) were lower than that of Narsinghpur (Madhya Pradesh)
(see figure 5.14). In Wardha (Maharashtra) around 52% of the sample households had
information about MSP whereas in Narsinghpur (Madhya Pradesh) around 94% of sample
household had information about MSP. Again this could be partly due to the high share of
medium and large farmers in the sample by Narsinghpur (Madhya Pradesh).
51
Figure 5.13: Percentage Share of Households with Information about MSP, State wise
94
100
Figure 5.13: Percentage Share of Households with Information about
Figure 5.13: Percentage Share of Households with Information about MSP, State wise MSP, State wise
90
80
94
70
100
60 52
90
50
80
40
70
30
60 52
20 11
50
10
40
0
30
Karnataka
11 Maharashtra Madhya Pradesh
20
10
Source:
0 Survey Data
The reason why Narsinghpur (Madhya Pradesh) had the highest share of sample households
Source:
Source:Survey Data Data
Survey
with information regarding MSP is also clear from the below figure (see figure 5.14).
The
Mediumreason
and why
largeNarsinghpur (Madhya
farmers had greater Pradesh)
access had the highest
to information shareof of
and the size sampleand
medium
The reason why Narsinghpur (Madhya Pradesh) had the highest share of sample households
households with information regarding MSP is also clear from the below figure (see figure
large farmers in the sample households were the highest from Narsinghpur (Madhya Pradesh)
with Medium
5.14). informationand regarding
large farmersMSPhad isgreater
also clear
accessfrom the below and
to information figure
the(see figure
size of 5.14).
medium
as compared
and large and to theinother
farmers two states.
the sample The access to information
highest was increasing as the farm size
Medium large farmers had households
greater accesswereto the
information from
and Narsinghpur (Madhya
the size of medium and
increases.asThe
Pradesh) access totoinformation,
compared the other twohowever
states.was the lowest among the small
was farmers in the
large farmers in the sample households were theThe access
highest to Narsinghpur
from information increasing
(Madhya Pradesh)
as the farm
sample (see size
figureincreases.
5.14) The access to information, however was the lowest among the
as compared to the other two states. The access to information was increasing as the farm size
small farmers in the sample (see figure 5.14).
increases. The access to Information
information, however was the lowest among the small farmers in the
Figure
Figure 5.14:
5.14: Farm
Farm Size
Size Wise Wise Information
about MSPabout
(in%) MSP (in%)
sample (see figure 5.14)
78
80
Figure 5.14: Farm Size Wise Information about MSP
67 (in%)
70
60 78
80
50 45 67
70
40
60 28
30 45
50 20
20
40
10 28
30
20
0
20
10
Source:
Source: 0 Survey
Survey Data Data
52
Source: Survey Data
50 52
PRODUCTION, MARKETS AND TRADE: A DETAILED ANALYSIS OF FACTORS AFFECTING PULSES PRODUCTION IN INDIA
Interestingly, though households in Narsinghpur (Madhya Pradesh) had the highest
information about MSP, households availing MSP was much lower and lower than Wardha
(Maharashtra). though
Interestingly, In Maharashtra almost
households in all farmers who(Madhya
Narsinghpur had information
Pradesh)about
had MSP availed
the highest
MSP. The percentage
information about MSP, share of households
households availingwith
MSPinformation was 52%
was much lower and utilisation
and lower was
than Wardha
(Maharashtra).
50%. The poorInaccess
Maharashtra almost all
to information byfarmers who in
households hadGulbarga
information about MSP
(Karnataka) availed
were also
MSP. The percentage share of households with information was 52% and utilisation was
reflected in the poor utilisation of MSP by these households (see figure 5.15).
50%. The poor access to information by households in Gulbarga (Karnataka) were also
reflected in the poor utilisation of MSP by these households (see figure 5.15).
Figure5.15:
Percentage ShareShare of Households
of Households with Utilisation
with Utilisation of Wise
of MSP, State MSP State Wise
50
50
45
40
35
30 26
25
20
15
10 6
5
0
Source:Survey
Source: Survey
DataData
The percentage share of households in each farm size category who were availing MSP
The the
was percentage
highestshare
amongof households
semi medium,in each farm size
medium, andcategory who were availing
large housheolds. MSP was
The percentage
share of households
the highest who medium,
among semi, were notmedium,
availing MSP was the
and large lowest among
housheolds. small farmers
The percentage share(see
of
figure 5.16). Though 78% of large farmers had information about MSP, only 33% of large
households who were not availing MSP was the lowest among small farmers (see figure
farmers availed MSP. Similarly, 67% of medium farmers had information about MSP but
5.16). Though 78% of large farmers had information about MSP, only 33% of large farmers
only 31% availed MSP.
availed MSP. Similarly, 67% of medium farmers had information about MSP but only 31%
availed MSP.
53
Figure 5.16: Utilisation of MSP Farm Size Wise (in%)
Figure 5.16: Utilisation of MSP Farm Size Wise (in%)
33
35 31
31
30
25
20 17
15 11
10
0
Source: Survey Data

Source: Survey Data
Conclusion
This chapter provided an overview of the socio-economic profile of the sample households.
Conclusion
The total households interviewed were 572 drawn from three major pulses producing
This chapter provided
States-Karnataka, an overview
Maharashtra andofMadhya
the socio-economic profile of
Pradesh. Majority of the
the sample households.
households in the
sample
The totalwere either interviewed
households semi medium wereor572
medium farmers
drawn from threeand agriculture
major was theStates-
pulses producing main
livelihood option for majority of the sample households. Narsinghpur (Madhya Pradesh)
Karnataka, Maharashtra and Madhya Pradesh. Majority of the households in the sample were
had the highest share of large farmers in the sample whereas Wardha (Maharashtra)
either semi medium or medium farmers and agriculture was the main livelihood option for
had the highest share of marginal and small farmers. In our sample, 482 farmers were
majority ofpigeon
cultivating the sample households.
pea and Narsinghpur
316 farmers (Madhya
were cultivating Pradesh)Out
chickpea. hadofthe highest
which share of
227 farmers
large farmers
were in the
cultivating sample
both whereaspea
the pigeon Wardha (Maharashtra)
and chickpea. had the
Majority ofhighest share households
the sample of marginal
didn’t havefarmers.
and small any awareness of government
In our sample, schemes
482 farmers to promotepigeon
were cultivating pulsespeaproduction or new
and 316 farmers
production techniques to reduce crop loss and improve productivity. The farm size wise
were cultivating chickpea. Out of which 227 farmers were cultivating both the pigeon pea
analysis showed that large farmers were more aware about new production practices
andcompared
as chickpea. Majority
to otheroffarm
the sample households
categories. didn’tthe
However, have any awareness
access of government
to training offered by
schemes to promote
government pulses production
and extension or new
services were the production techniques
highest among to reduce
the sample crop lossfrom
households and
Wardha
improve (Maharashtra).
productivity. The Interestingly, despite
farm size wise havingshowed
analysis higherthat
access to training,
large extension
farmers were more
services and new
aware about knowledge about
production government
practices schemes
as compared toand new
other production
farm techniques,
categories. However, thethe
access to training offered by government and extension services were the highest among the
sample households
Pradesh) from Wardha
had the highest (Maharashtra).
share of large farmersInterestingly,
in the sample.despite having
The size higher
wise access to
percentage of
training, who
farmers extension services
received andshowed
training knowledge
thatabout government
large farmers hadschemes
receivedand
morenew production
training. The
training wasthe
techniques, relatively higher
information of for
MSP semi medium,
received medium and
by households large farmers
in Wardha as compared
(Maharashtra) were
lower than that of Narsinghpur (Madhya Pradesh). This is due to the fact that Narsinghpur
(Madhya Pradesh) had the highest share of large farmers in the sample. The size wise
54
Chapter
Pulses Production, Trade
06 and Government Policies
6.1 Introduction
The dependence of pulses on rainfed production leads to highly volatile domestic
production from one year to the next. Due to this erratic production, domestic pulses
production faces the challenge of meeting domestic demand. Also, the production of
pulses lagged behind population growth and as a result the per capita net availability of
pulses declined over the years (refer chapter 3). The sluggish production and widening
gap between the supply and demand and volatility in prices are the major challenges
faced by Indian pulses sector in the recent years. The data shows that India is the
world’s largest consumer of pulses (Reddy, Bantilan, & Mohan, 2012), yet the domestic
production is not commensurate with demand, thereby making India a net importer of
pulses. The last couple of years witnessed huge increase in imports of pulses to match the
consumption requirements. Note that India is the largest importer of pulses despite of
being the second largest producer of pulses. The persistent deficit and the soaring pulses
prices made it inevitable for the country to import pulses. The excess demand is primarily
due to the stagnation in productivity which is further accelerated by the decline in area
under cultivation which we observed in chapter 2. The data shows that India’s import
doubled over the last 10 years and it accounts for around 15-16 per cent of total domestic
production (Bhattacharya et.al., 2017). Growing import dependency and rising prices
forced government to adopt duty-free import policy.
India’s import demand has affected negatively due to the depreciation of Indian currency
with respect to US, Australian and Canadian dollars (Bhatacharya et.al., 2017). This had
caused inflation of pulse prices in Indian domestic markets. Depreciation of Indian
currency implies higher import bill for Indian pulse importers, making import less viable.
India’s total pulses imports sharply increased from around 352 thousand tonnes in 2000
to 6185 thousand tonnes in 2016 (see figure 6.1). As a result, the share of India’s imports
of pulses in the total world pulses import increased from mere 5% to around 36% in 2016
(see figure 6.2). Canada, Australia, Myanmar and China were among the top exporters of
pulses in the world. India had been always a major importer of pulses and the imports
began to increase during the period of 1998-2000. The major importers of pulses to India
were Australia, Canada, Myanmar, Tanzania and US. Over time volume of pulses imports
increased, and India also started to import from additional countries. For example, India
started to import pulses from Ethiopia, Mozambique, Russia, China etc. Additionally, in
2016, in the wake of soaring pulse prices in the domestic market, India signed an MoU to
double pulses imports — mostly pigeon pea — from the east African nation over a five-year
period.
Figure 6.1: India’s Import of Pulses (in Tonnes)
7000000
6000000
5000000
4000000
3000000
2000000
1000000
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Source: FAOSTAT
Figure 6.2: India’s Share in Total World Import of Pulses
40
35
30
25
20
15
10
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Source: FAOSTAT
Peas, kidney beans, chickpea and pigeon pea were the major pulses that were imported
to India. One of the key issues with regard to import of pulses is the high degree of
concentration from few exporting nations. For each type of pulses there has usually been
a single largest importer with significant market share. For example, Canada for peas,
Australia for chickpea, China for kidney beans and Myanmar for pigeon pea. Therefore,
any shifts in domestic-trade policies or crop failure can have huge implications on the
pulses imported by India. For example, there has been stagnancy in area under peas
cultivation in Canada and weather fluctuations in Myanmar that affected the output
significantly (Bhattacharya et.al., 2017). Also the study note that Canada, Australia and
Myanmar have high instability with respect to production and area.
Imports of all types of pulses were increasing over the period except for pigeon pea. For
example, total imports of dry peas increased from around 137 thousand tonnes in 2000 to
around 3061 thousand tonnes in 2016 (see figure 6.3). This marked an increase in India’s
share in total world peas (dry) imports from around 5% to 47% during 2000-2016 (see
figure 6.4).
Figure 6.3: Trends in Imports of Peas (dry) (in Tonnes)
3500000
3000000
2500000
2000000
1500000
1000000
500000
0
20002001200220032004200520062007200820092010201120122013201420152016
Source: FAOSTAT
Figure 6.4: India’s Peas (dry) Import as a Percent of Total World Import
50.00
45.00
40.00
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: FAOSTAT
Similarly, India’s chickpea imports also increased during the same period from around
64 thousand tonnes in 2000 to around 873 thousand tonnes in 2016 (see figure 6.5). As a
result, India’s share in world imports of chickpea also increased from around 10% in 2000
to around 45% in 2016 (see figure 6.6). But the imports of chickpea experienced more
fluctuations as compared to peas.
Figure 6.5: Trends in Imports of Chickpea (in Tonnes)
1000000
900000
800000
700000
600000
500000
400000
300000
200000
100000
0
20002001200220032004200520062007200820092010201120122013201420152016
Source: FAOSTAT
Figure 6.6: India’s Chickpea Import as a Percent of Total World Import
50.00
45.00
40.00
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: FAOSTAT
Another major pulse imported by India is lentils. The imports of lentils were sharply
increasing over the last couple of years especially since 2012. The imports of lentils
increased from around 206 thousand tonnes in 1988 to 1123 thousand tonnes in 2017. In
2012 it was 441 thousand tonnes. The highest import occurred in the year 2015 and the
total quantity imported was around 1162 (see figure 6.7).
Figure 6.7: Trends in India’s Imports of Lentils (in Thousand Tonnes)
1400
1200
1000
800
600
400
200
0
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Source: wits.org
As a result of an increase in imports of lentils, the share of the same in total world import
also sharply increased from around 1% in 1997 to around 39% in 2017 (see figure 6.8).
Figure 6.8: India’s Import of Lentils as a Percent of Total World Import
45
40
35
30
25
20
15
10
0
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Source: wits.org
6.2 Country Wise Imports of Major Pulses

The below sections will have closer look at the import scenario by analyzing the major
importers of each crop.
As mentioned already, Australia was the major importer of chickpea to India. For example,
the import of chickpea from Australia to India sharply increased from around 55 thousand
tonnes in 2002 to around 941 thousand tonnes in 2017 (see figure 6.9). The other important
suppliers were Canada and Ethiopia. Canada’s import was highly fluctuating during 2002-
2017 (figures 6.8 & 6.9). In 2002 India imported around 114 thousand tonnes of chickpea
from Canada and in the remaining years except 2016 the import of chickpea from Canada
was negligible. In 2016 India imported around 606 thousand tonnes of chickpea from
Canada. In 2017, (in the first three quarters), India imported only 3 thousand tonnes (see
figure 6.10). Similarly, from Ethiopia, the import was always less than 10 thousand tonnes
except in 2015. In 2015 India imported around 15 thousand tonnes of chickpea from
Ethiopia (see figure 6.11).
Figure 6.9: Import of Chickpea from Australia (in Thousand Tonnes )
1000
900
800
700
600
500
400
300
200
100
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: DGCI&S
Figure 6.10: Import of Chickpea from Canada (in Thousand Tonnes)
700
600
500
400
300
200
100
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: DGCI&S
Figure 6.11: Import of Chickpea from Ethiopia (in Thousand Tonnes)
16
14
12
10
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: DGCI&S
As far as peas are concerned, Canada was the major importer of peas to India. The other
major importers were US, Ukraine, Australia and Russia. Among these countries, Russia
emerged as a major importer in recent years (see figure 6.12). However, the share of Canada
in total imports of peas much higher than the other countries. For example, the imports of
peas from Canada increased around 333 thousand tonnes in 2002 to 1605 thousand tonnes
in 2016. But the imports of peas from Canada only in the last three quarters of data shows
that import touched around 1152 thousand tonnes (see figure 6.13). Though there was
a decline in the imports of peas from Australia, there was an increase in the imports of
peas from US, Ukraine and Russia. The imports of peas from US to India increased from
around 3 thousand tonnes in 2002 to around 212 thousand tonnes in 2016. The import in
the first three quarters of 2017 was around 49 thousand tonnes. Similarly, the imports
from Russia increased from around 20 thousand tonnes in 2002 to around 414 thousand
tonnes in 2016, and 237 thousand tonnes in the first three quarters of 2017. The imports
from Ukraine also increased from 28 thousand tonnes to 171 thousand tonnes but declined
to 25 thousand tonnes in 2017. Australia was the biggest importer of peas after Canada
in the initial years but the amount sharply declined in the later years. The imports from
Australia was around 143 thousand tonnes in 2002 but declined to around 70 thousand
tonnes in 2016 and marginally increased to 82 thousand tonnes in 2017 (see figure 6.12).
Figure 6.12: Imports of Peas from Major Importers (in Thousand Tonnes)
1800
1600
In thousand tonnes
1400
1200
1000
800
600
400
200
0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Year
Australia Canada US Ukraine Russia
Source: DGCI&S
As far as the imports of kidney beans is concerned, as mentioned earlier China was
the major importer to India. The other two importers were Ethiopia and Myanmar.
The imports from Myanmar was higher than the imports from Ethiopia until 2010. But
since then Ethiopian imports were higher than Myanmar imports (see figure 6.13). The
imports of kidney beans from China increased from 104 thousand tonnes to 744 thousand
tonnes during 2002 to 2015. In the subsequent years the imports marginally fell to 586
thousand tonnes and 393 thousand tonnes. But the figure for 2017 is only for the first three
quarters. Similarly the imports from Ethiopia increased from around 11 thousand tonnes
to 269 thousand tonnes during 2002-2016. The imports from Myanmar increased from 77
thousand tonnes in 2002 to 128 thousand tonnes in 2016. The imports from Myanmar was
the highest in the year 2008 with the imports of around 194 thousand tonnes (see figure
6.13).
Figure 6.13: Imports of Kidney Beans from Major Importers (in Thousand Tonnes)
900
800
700
600
500
400
300
200
100
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
China Ethiopia Myanmar
Source: DGCI&S
In the case of pigeon pea, the major importer was Myanmar, though the import experienced
sharp fluctuations during the period. These fluctuations could be attributed to the
domestic fluctuations with respect to the production. The imports of pigeon pea from
Myanmar was 258 thousand tonnes in 2002 and 220 thousand tonnes in 2017 (see figure
6.14). However, the imports from Mozambique and Tanzania sharply increased during the
period. The imports from Tanzania increased from around 11 thousand tonnes in 2002 to
166 thousand tonnes in 2016, almost close to the imports from Myanmar. Considering the
imports in the first three quarters of 2017, the imports from Tanzania fell to 38 thousand
tonnes. In the case of Mozambique, the imports experienced an increase over the period.
The imports increased from 2 thousand tonnes in 2002 to 125 thousand tonnes in 2016.
Figure 6.14: Imports of Pigeon Pea (Tur) from Major Importers (in Thousand Tonnes)
450
400
350
300
250
200
150
100
50
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Tanzania Mozambique Myanmar
Source: DGCI&S
Next we will turn into the analysis of import prices. The unit value of import is taken as
the proxy for import price. Though Australia was the major importer of chickpea, the
prices were lower for Australian imports as compared to the other two countries. This
can be one of the reasons for Australia to dominate the import. The import prices of both
Canada and Ethiopia were increasing since 2014 (see figure 6.15).
Figure 6.15: Yearly Average Prices (Rs per Kg) of Chickepea Imported by Major Importers
90
80
70
60
50
40
30
20
10
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Australia Canada Ethiopia
Source: Calculated using the data from DGCI&S
The yearly average unit import prices for peas was very much similar until 2011, but
since 2011, the US and Russian price started to increase more than the prices of Australia,
Canada and Ukraine (see figure 6.16).
Figure 6.16: Yearly Average Prices (Rs per Kg) of Peas Imported by Major Importers
40.00
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Australia Canada US Ukraine Russia
The yearly average import price of kidney beans from China was higher than the other
major importers. The gap between Chinese price and other prices were the highest during
2011 to 2015 (see figure 6.17). As mentioned already, China is also the major importer of
kidney beans to India. Among the major importers Ethiopian price was the lowest.
Figure 6.17: Yearly Average Prices (Rs per Kg) of Kidney Beans Imported by Major Importers
90
80
70
60
50
40
30
20
10
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
China Ethiopia Myanmar
Similar to kidney beans, the yearly average unit import price for pigeon pea was also the
highest for the major importer of pigeon pea – Myanmar. As in the case of kidney beans,
the gap between Myanmar price and other two importer’s price widened during 2014-16
period. The period also coincides with the deficit in pigeon pea that the country had faced
(see figure 6.18).
Figure 6.18: Yearly Average Prices (Rs per Kg) of Pigeon Pea (Tur) Imported by Major Importers
90
80
70
60
50
40
30
20
10
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Tanzania Mozambique Myanmar
6.3 Tariff Scenario
The most favoured nation (MFN) tariff for peas is 50, though it was reduced to 10 in 2008
again the rate was increased to 50 in the subsequent years. Whereas for chickpea it was
and reduced to 10 in 2008 but again increased to 30 in the subsequent years. In 2015 and
2016, the MFN rate was again 10. Similarly, in the case of kidney beans and lentils the MFN
rate was 30 except 2008. In the year 2015 the MFN rate was again reduced to 10. For pigeon
pea the MFN rate was 30 from 2012 to 13 but reduced to 10 in 2015.
6.4 Conclusion
The analysis in the above sections showed that there has been a substantial increase
in the imports of most of the pulses in the last several years. Also the share of India’s
imports in world imports of pulses also showed a sharp increase. This points out the
increasing import dependency and severe supply deficit that India is facing in terms of
meeting the demand for protein rich crop. The data published by National Sample Survey
Office (NSSO) in 2014 shows that pulses and pulses products as a whole, the per capita
consumption increased by 7778 grams between 2004-05 and 2011-12. Out of which 705
grams per month to 783 grams per month in the rural sector and 824 grams to 901 grams
in the urban sector. Interestingly, 69 grams and 57 grams of increase in the rural and
urban areas was contributed by the four items split gram, whole gram, pea and besan.
The four pulses arhar, moong, masur and urd – which in 2011-12 together made up about
64% of consumption of pulses and pulse products in rural India and 68% in urban India
– registered a total increase in monthly per capita consumption of only 14 gm in the rural
sector and 18 gm in the urban sector over this 7-year period.
The widening gap between supply and demand, and the domestic uncertainties with
respect to the production etc. might continue to increase the import dependency unless
effective policy measures are undertaken to improve the production and productivity and
pulses. The implications of long term dependency on import depends upon the nature
of import pricing that is undertaken by the importers as we have already discussed the
import of each type of pulses is dominated by one or two single largest importers. This
may increase the potential for monopoly pricing. Therefore, the next chapter will make
an analysis of import pricing and exchange rate pass through into pulses imported to
India by major importers.
Chapter Pricing and Exchange Rate
07 Pass-through in Pulses
Imports
7.1 Introduction
The import of pulses to keep the domestic supply high and domestic prices low were
also not as straightforward as expected. Therefore, trade play a crucial role in domestic
price formation. Since we are no more in a position to isolate domestic markets from
world markets and the markets are getting integrated, the nature and dimensions of trade
has profound implications on domestic production, consumption, prices and the supply
chain that includes processing and marketing (Chandra et.al.,2017). Additionally, chapter
6 showed that, India has consistent imports of peas, kidney beans, chickpea and pigeon
pea from foreign countries and for each of the pulses we have a major importer along
with two or three other importers. The analysis of unit import price also showed that the
prices were generally high during the period when Indian experienced a deficit and also
the prices of some of the dominant importers were also remained to be higher than the
other importers. So it is imperative to analyze the import pricing behavior and exchange
rate pass through into import prices to understand whether these importers have any
monopoly power in pricing the products.
7.2 The Concept of Pricing to Market and Exchange Rate Pass Through
In a perfectly competitive market price is determined by the intersection of the market
supply and market demand. Therefore, no single supplier can influence prices. A typical
outcome of perfect competition is that marginal revenue is equal to the marginal cost
resulting in zero profits under equilibrium. At the equilibrium, the prices received by
the seller are equivalent to marginal revenue and marginal cost. While in an imperfect
competition setting, price is greater than marginal revenue and marginal cost. The new
trade theories based on the assumptions of scale economies and product heterogeneity
ascertains that in the real world, trade is characterised by imperfect competition and
oligopolistic market structures.
The non-competitive pricing behaviour of firms is explained by a concept introduced by
Krugman (1987) known as Pricing to Market (PTM) behaviour. PTM behaviour implies
exchange-rate induced price discrimination. The exchange-rate pass-through is defined
as the elasticity of export prices to exchange rate changes.
Assume that the France imports widgets from India. The widgets cost INR 10000 and 1
Euro is equivalent to INR 79.76. The importer from France has to pay around 125 Euro.
When the Indian rupee appreciates against Euro with 1 Euro now being equivalent to INR
60, the price that the importer from France has to pay increases to 166.66 Euro. Due to
this, the widgets have become expensive for the importer.
Now assume that Indian exporter is absorbing part of the price increase. Assume 50% of
the increase in the price is absorbed by Indian exporter. Then the price that the importer
from France has to pay would be 146.02 Euro. So, 50% of the increase in the price is
absorbed by the Indian exporter. This is known as incomplete pass through. This is also
known as local currency stabilisation. The exchange rate pass through would have been
complete if the price was 166.66 Euro after the change in exchange rates. If the Euro price
remained as 125 Euro even after the changes in the exchange rates, the exchange rate pass
through would have been 100% incomplete.
The opposite scenario will take place when there is currency depreciation. For example,
assume that the Indian currency is depreciated against Euro and now INR 90 is equivalent
to 1 Euro. As a result, the widget is now cheaper for the importer from France as he/she
needs to pay only 111 Euro. In this case, the exchange rate passes through would be 100%
complete if the price that the importer pays is 111 Euro. The exchange rate pass through
in this case will be incomplete if the Indian exporter increases the price. For example,
assume that Indian exporter did not allow the prices to go down to 111 Euro rather he/she
increased the price by 50%. The price that the importer has to pay now is 118 Euro. This
shows the exchange rate pass through is incomplete. So here the exporter has increased
the price as a result of the change in the exchange rate and this is known as amplification
of exchange rate. The pass through would have been 100% incomplete if the importer
from France had to still pay 111 Euro.
7.3 Review of Literature and Theoretical Framework of the Study

Theoretical framework
The theoretical model discussed below follows the formulation developed by Knetter
(1989, 1992). Let us consider an exporter selling to N destination markets, with demand
faced in each market as follows:
qit = f(pit eit )zit , i=1….N, t=1……T, (1)
1992).
1992). Let
Let us
us consider
consider an
an exporter
exporter selling
selling to
to N
N destination
destination markets,
markets, with
with demand
demand faced
faced in
in
each
each market
market as
as follows:
follows:
Where qit is the quantity q

qitit = f(pititeeitit)z
f(p
= demanded ,, ∀i
)zitit by =
=11… … .. N,
∀idestination N, ∀t =
=1
∀tmarket 1……… T,
i in
… (1)
T, period
(1) t, pit is the price
charged
Where qqititbyis
Where is the
the exporting
the quantity
quantity countryby
demanded
demanded to destination
by importing market
destination country
market i in
ii in
in period
period
period t, isdenoted
t, ppititt,is the priceincharged
the price terms
charged
of exporter’s currency. eitto , is the exchange rate and zit, refers to the demand shifters (a
by
by the
the exporting
exporting countrycountry to importing
importing country country ii inin period
period t,
t, denoted
denoted in in terms
terms ofof exporter’s
exporter’s
random variable), variables that induce the demand curve to shift.
currency. eeitit,, is
currency. is the
the exchange
exchange raterate and and zzitit,, refers
refers to
to the
the demand
demand shifters
shifters (a (a random
random variable),
variable),
variables
The that
that induce
cost function
variables forthe
induce thedemand
the exporter
demand curve to
to shift.
is given
curve as;
shift.
Ct = C (∑i qit) δt i=1….N,  t = 1……T, (2)

The
The cost
cost function
function for
for the
the exporter
exporter is is given
given as; as;
Here, C , measures the
t
𝐶𝐶𝐶𝐶 =
= 𝐶𝐶𝐶𝐶(∑
𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡cost 𝑞𝑞𝑞𝑞𝑖𝑖𝑖𝑖𝑡𝑡𝑡𝑡 )𝛿𝛿𝛿𝛿
𝑖𝑖𝑖𝑖 𝑞𝑞𝑞𝑞
of production
𝐶𝐶𝐶𝐶(∑ 𝑡𝑡𝑡𝑡 )𝛿𝛿𝛿𝛿𝑡𝑡𝑡𝑡 ,, ∀𝑖𝑖𝑖𝑖 =
∀𝑖𝑖𝑖𝑖 in 1
1…… .. 𝑁𝑁𝑁𝑁,
= home
𝑖𝑖𝑖𝑖 𝑖𝑖𝑖𝑖𝑡𝑡𝑡𝑡 𝑡𝑡𝑡𝑡
∀𝑡𝑡𝑡𝑡
∀𝑡𝑡𝑡𝑡 =
currency,
𝑁𝑁𝑁𝑁, =11… … 𝑇𝑇𝑇𝑇, (2)
… 𝑇𝑇𝑇𝑇,
…summed (2) over all destination
markets, denoted by i and ofδ refers to a random variable that shiftsover
the cost function, for
Here, C
Here, Ctt,, measures
measures the
the cost
cost oft production
production in in home
home currency,
currency, summed
summed over allall destination
destination
example, changes ini input prices to
in period t. variable that shifts the cost function, for
markets,
markets, denoted
denoted by and δδtt refers
by i and refers to aa random
random variable that shifts the cost function, for
example,
example,
Using changes in
changes(1)
equations input
inand prices
input(2),
prices in
in period
period
exporter’s t.
t. maximising condition for period t is;
profit
Using
Using equations
equations (1)
(1) and
and (2),
(2), exporter’s
exporter’s profit
profit maximising
maximising condition
condition for period tt is;
for period is;
𝑁𝑁𝑁𝑁 𝑁𝑁𝑁𝑁
𝑁𝑁𝑁𝑁 𝑁𝑁𝑁𝑁
�𝑡𝑡𝑡𝑡(𝑝𝑝𝑝𝑝
� (𝑝𝑝𝑝𝑝11,, 𝑝𝑝𝑝𝑝
𝑝𝑝𝑝𝑝22,, … 𝑝𝑝𝑝𝑝𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛)) =
… .. 𝑝𝑝𝑝𝑝 = �
� 𝑝𝑝𝑝𝑝 𝑞𝑞𝑞𝑞𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 (𝑒𝑒𝑒𝑒
𝑝𝑝𝑝𝑝𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 𝑞𝑞𝑞𝑞 𝑝𝑝𝑝𝑝𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 )) −
(𝑒𝑒𝑒𝑒𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 𝑝𝑝𝑝𝑝 − 𝐶𝐶𝐶𝐶
𝐶𝐶𝐶𝐶 ��
�� 𝑞𝑞𝑞𝑞
𝑞𝑞𝑞𝑞𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 (𝑒𝑒𝑒𝑒
(𝑒𝑒𝑒𝑒𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 𝑝𝑝𝑝𝑝
𝑝𝑝𝑝𝑝𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 �� 𝛿𝛿𝛿𝛿
𝛿𝛿𝛿𝛿𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 (3)
(3)
(3)
𝑡𝑡𝑡𝑡 𝑖𝑖𝑖𝑖=1 𝑖𝑖𝑖𝑖=1
𝑖𝑖𝑖𝑖=1 𝑖𝑖𝑖𝑖=1
The
The
first-order
first-order conditions
Thefirst-order conditions
conditionsof
of the
ofthe
profit-maximisation
theprofit-maximisation
profit-maximisation
for an
forfor exporter
anan
exporter
exporter
at
at period
period t,
t, indicates
at period indicates that
that
t, indicates
the
the exporter
that will
will allocate
the exporter
exporter output
will allocate
allocate in
in different
outputoutput destination
in different
different markets
destination
destination at
at the
the level
marketsmarkets where
at the
level level
where marginal
where
marginal
marginal
revenue revenue in eachequated
market istheequated to the common marginal cost. Carewout (2000)
revenue in
in each
each market
market is
is equated to
to the common
common marginal
marginal cost.
cost. Carew
Carew (2000)
(2000) points
points out that
that
points
prices out that prices charged by an exporter in each destination market are composed of
prices charged
charged by
by an
an exporter
exporter in
in each
each destination
destination market
market are
are composed
composed ofof the
the product
product of
of the
the
the product of the common marginal cost and a destination specific mark-up,
common
common marginal
marginal cost
cost and
and aa destination
destination specific
specific mark-up,
mark-up,
𝜀𝜀𝜀𝜀
𝑝𝑝𝑝𝑝 𝜀𝜀𝜀𝜀𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 � , ∀𝑖𝑖𝑖𝑖 = 1 … . . 𝑁𝑁𝑁𝑁 (4)
𝑝𝑝𝑝𝑝𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 =
= 𝑀𝑀𝑀𝑀𝐶𝐶𝐶𝐶
𝑀𝑀𝑀𝑀𝐶𝐶𝐶𝐶 ��𝜀𝜀𝜀𝜀𝑖𝑖𝑖𝑖 −1 � , ∀𝑖𝑖𝑖𝑖 = 1 … . . 𝑁𝑁𝑁𝑁 (4)
(4)
𝜀𝜀𝜀𝜀𝑖𝑖𝑖𝑖 −1
Where, MC
Where, MC refers
refers toto the
the common
common marginal
marginal cost
cost faced
faced by
by anan exporter
exporter and
and εεii is
is the
the price
price
Where, MC refers to the common marginal cost faced by an exporter and εi is the price
elasticity of
elasticity of demand
of demand
demand facedfaced by
faced by the
by the exporter
the exporter with
exporter with respect
with respect to
respect to local
to local currency
local currency price
currency price
price inin the
in the
the
elasticity
destination
destination marketi.
destination market
market i.i.Hence,
Hence,price
Hence, price in the
inin
price exporter’s
thethe
exporter’s
exporter’scurrency
currency is
is aaismark-up
currency mark-up over marginal
overover
a mark-up marginal cost,
cost,
marginal
and
and this
cost, andmark-up
this is
is determined
this mark-up
mark-up by
by the
the price
is determined
determined elasticity
by the
price of
of demand
price elasticity
elasticity demand ofthat the
the exporter
demand
that that the
exporter faces in
in the
exporter
faces the
faces in the destination market i.
destination market i.
destination market i.
Literature Review
72
72 by the intersection of demand and supply.
As per the standard theory price is determined
In a perfectly competitive market price is equal to marginal cost and marginal revenue.
Under perfectly competitive structure, so single supplier can influence the price at which
they are selling the products rather they act as price takers in the market. Therefore, in a
perfectly competitive market structure setting marginal revenue is equal to the marginal
cost resulting in zero profits under equilibrium. At the equilibrium, the prices received
by the seller are equivalent to marginal revenue and marginal cost. While in an imperfect
competition setting, price is greater than marginal revenue and marginal cost. However,
this is not the case in an imperfectly competitive market structure. In an imperfectly
competitive structure price is not equal to MC and MR. So a seller in an imperfectly
competitive structure is a price maker in the market. The new trade theories based on the
assumptions of scale economies and product heterogeneity ascertains that the real world,
trade is characterised by imperfect competition and oligopolistic market structures.
The non-competitive pricing behaviour of exporting firms is explained by a concept

introduced by Krugman (1987) known as Pricing to Market (PTM) behaviour. PTM
behaviour implies exchange-rate induced price discrimination. Using this framework
exchange rate pass-through into the prices of an imported commodity is analysed. As per
PTM, exporters either maintain or even increases (decrease) export prices when currency
depreciation (appreciation) takes place relative to importer’s currency. If an exporter
is not allowing the exchange rate changes to get fully reflected in the import prices of
the commodity, then exchange rate pass through will be incomplete. The exporter can
either absorb the increase in prices by reducing the prices when there is an appreciation
of currency or increase the price when there is a depreciation of currency. It depends
on the monopoly power of the firm. This is called non-competitive pricing behaviour.
The exchange-rate pass-through is therefore defined as the elasticity of export prices to
exchange rate changes (Mallick and Marques, 2012). An incomplete exchange rate pass-
through would prevent prices from equating to marginal cost. The export prices can
have destination specific mark-up of price over marginal cost. In the context of a general
equilibrium framework, PTM refers to the local currency pricing whereby prices are pre-
set in the buyers currency (Byrne et.al., 2013). The local currency pricing has become
popular in open economy macroeconomic models.
Asymmetric response of export prices to appreciation and depreciation of exporter’s

currency can arise due to several reasons (Knetter, 1992). Marketing bottlenecks or supply
restrictions can be the reason for PTM during currency depreciation, while increasing
the market share can be the reason for PTM during currency appreciation. The former is
known as ‘bottlenecks model’ while the latter is known as ‘market share model’.
The first comprehensive empirical estimation of PTM was undertaken by Knetter (1989).
Using a fixed effect model, the price discrimination by US and German exporters were
analysed to see responsiveness of product’s export price to destination specific exchange
rate changes. The study observed PTM behaviour by both German and US exporters.
There have been plenty of empirical attempts to analyse the PTM behaviour of both
exporters both from an importing country perspective as well as from an exporting
country perspective. However most of the empirical studies on PTM is in the context of
manufactured products. There are few studies in the context of food and agricultural
products. Pick and Park (1991)’s analysis was one of the early attempts in the area of food
and agricultural products. They analysed the competitive structure of U.S. agricultural
exports of wheat, cotton, corn and soybeans. The study reveals the market power of
exporters. Furthermore, they compared their PTM results between nominal and real
exchange rates. Similarly, Yumkella et.al., (1994) examined the PTM behaviour by US and
Thailand rice exporters and found evidence of non-competitive pricing behaviour, either
through price discrimination across destination markets or through imperfect exchange
rate pass-through. An analysis of pricing behaviour of wheat, pulses and tobacco exported
from US and Canada is analysed by Carew (2000). The results from the analysis provided
evidence for market imperfection and price discrimination with wheat exports showing
greater market imperfection and price discrimination in the destination markets.
Miljkovic, Brester and Marsh (2003), quantified the effects of exchange rate changes on
US beef, pork and poultry export prices using the PTM model where the exchange rate
were market specific exchange rates.
The study done by Lavoie (2005) analysed the case of Canadian wheat exports using monthly
price data for the period of 1982 to 1994. The study observed that the Canadian Wheat
Board (CWB) discriminates prices across destination markets. Following Knetter (1989,
1993), Jin and Miljkovic (2008) also examined the case of US wheat exports to 22 markets
using quarterly data for the period from 1989 to 2004. The study found that exchange
rate fluctuations influenced export pricing strategy of the US exporters of wheat in 9 out
of 22 destination markets. One of the recent studies done by Pall et.al., (2013) for Russia
analysed the pricing behaviour of wheat in 25 destination markets using quarterly data for
2002 to 2010. The study observed that the exporters were able to price discriminate in a
few destination markets. The study by Pall et,al., (2013) made use of both the nominal as
well as real exchange rates in their analysis. Nonetheless, Miljkovic and Zhuang (2011) in
their study for Japan used commodity-specific (imports) trade-weighted exchange rates.
This specific type of exchange rate model was different from what earlier studies used
as exchange rates, i.e. in earlier studies exchange rates were aggregate trade-weighted
exchange rates provided by the Central Bank authorities or sources. Goldberg (2004) and
Pollard and Coughlin (2006) studies highlight the fact that exchange rate pass-through
estimated results were sensitive to the exchange rate index utilised. Similarly, our study
make use of nominal, real and commodity-specific export trade-weighted exchange rates.
There have been few attempts in the Indian context as well. The pioneering studies on
PTM undertaken by Varma and Issar (2016) for India’s exports of high value agricultural
products such as ground nut, banana, onion and so on. Another study was undertaken on
the exports of basmati and non-basmati rice (Issar and Varma, 2016). The results from the
analysis showed that Indian exports were able to price discriminate and exchange rate
pass through were incomplete at least some of the major destination markets. However,
there have been no analysis for India from the import perspective. The present study is
intended to fill up this gap by analysing the import pricing behaviour of pulses imported
to India by major importers of pigeon pea, chickpea, kidney beans and peas.
7.4 Model Specification

The empirical specification to test the above discussed PTM model can be derived from
equation (4) (Knetter, 1989) as follows:
ln pit = θt + λi + βi (ln E_it)+ uit (5)
Where ln(pit)is the log of the import price by country i at period t, measured in Indian
rupees per kg. θt represents the time effects corresponding to the t periods. As per Silvente
(2005) θt, is the time varying marginal costs of an exporter. The term λi refers to the time-
invariant country specific effects. The βi coefficient measures the exchange rate pass-
through for the individual i countries. The ln(eit) is the log of importer-specific exchange
rate expressed as the units of the importer’s currency per unit of Indian rupees. Finally,
uit is the regression error term distributed. According to Silvente (2005), uit accounts for
unobservable factors that could not account for and also any measurement error in the
dependent variable.
The equation (5) allows us to test for the following hypotheses.
• Scenario 1: H0: βi = 0 , λi = 0
• Scenario 2:HA: βi=0, HA: λi ≠ 0
• Scenario 3: HA: βi ≠ 0, HA: λi ≠ 0
The failure to reject the null hypothesis (H0: βi = 0, λi = 0) will prove the existence of
competitive pricing in the Indian market. In such case, import prices are hardly influenced
by exchange rate changes (βi = 0) and country effects (λi = 0) (Carew, 2000). The failure
to accept the null hypothesis indicates the presence of imperfect competition and price
discrimination by the importing country.
The second scenario indicates constant elasticity of demand with respect to the import
price. Therefore, a statistically significant λi indicates the fact that the importing country
is a price maker in the market. In such a model, mark-up over marginal cost is constant
but may vary over time and across different importing countries. Similarly, the import
prices are hardly affected by exchange rate fluctuations (βi = 0). However, the significance
of the parameter λi estimated with respect to the country effects does not necessarily show
imperfect competition as the country effect also captures quality differences (Knetter,
1989; Falk and Falk, 2000; Pall et.al., 2013). In other words the price differences across
different importing countries could be also due to the quality differences in the product.
The third scenario indicates price discrimination with varying elasticity of demand.
The elasticity of demand may vary along with exchange rate variations. This is pricing
to market behaviour because the optimal mark up over marginal cost will not only vary
across importing but also is changed due to exchange rate changes and, therefore, βi ≠ 0
and λi≠ 0. The estimated statistically significant parameter of βi associated with exchange
rate effects can be positive or negative (Knetter, 1993). ‘Incomplete pass-through’ would
occur if βi< 0 and it is said to be more than complete if βi> 0.
A negative βi implies that the exporting firms are practicing ‘local currency price
stabilisation’. On the contrary, a positive βi implies the amplification of exchange rate
effects. When both the estimated coefficients are significantly different from zero (βi ≠
0 and λi ≠ 0), this indicates the possibility for an exporting firm to amplify the effect of
destination specific exchange rate changes through destination specific changes in the
mark-up (Pall et.al., 2013).
The price elasticity of exchange rate changes can vary between appreciation and
depreciation scenario. More recently, Knetter (1994) describes how PTM behaviour may be
asymmetric with respect to appreciations and depreciations. According to Knetter (1994)
PTM behaviour can be greater when domestic currency (exporter’s currency) depreciates
when there are export volume constraints. The volume constraints can be either induced
by ﬁrm-speciﬁc factors or government policies. When the domestic currency depreciates,
these constraints eliminate the possibility of increasing sales volume. Instead, exporters
would increase their foreign currency prices to clear the market. Therefore, in order to
estimate the impact of appreciation and depreciation separately, an interaction of the
dummy variable with the exchange rate is constructed. This dummy variable will capture
the asymmetric effect of exchange rate changes. This is common in the literature (Knetter,
1992; Vergil, 2011). Therefore the equation (5) is re-specified in the following manner to
test for asymmetries in the response of export prices to exchange rate changes.
Et= (β1+ β2 Dt)Et
=β1 Et + β2 Dt × Et
A dummy variable assumes a value of 1 for periods of appreciation (a fall in) and 0 for
periods of depreciation and is specified in the following manner;
Dt = 1 if ∆Et > 0 (i.e. the appreciation of the exporter’s currency); Dt = 0 if ∆ Et < 0

(i.e. depreciation of the exporter’ s currency).
Accordingly, equation (5) can be specified as follows:
ln pit= θt + λi+ β1 (ln E1t ) + β2 (ln E2t )+ uit (6)
ln pit= θt + λi + β1 (ln E1t )+ β2 (ln E1t×Dt ) + uit (7)
In the above equation, the interaction term is expressed to capture asymmetry in the
exchange rate fluctuations. If its coefficient is statistically significant and has a positive
sign, the effect of appreciation of exporter’s currency exchange rates on export prices
is lower than depreciation. Similarly, a significant and negative coefficient implies that
the effect of appreciation of exchange rates on export prices is greater than depreciation
(Byrne et.al., 2010).
7.5 Data Description

The unit value of import is taken as a proxy for import price. The import data of each
type of pulses are obtained from the Directorate General of Commerce and Intelligence
(DGCI&S).
The top importers are identified on the basis of their share in total imports as well as the
consistency in imports throughout the period selected for study. The major pulses that
are selected for the study are peas, kidney beans, chickpea and pigeon pea. Chickpea
and pigeon pea are the major pulses produced in India. The contribution of chickpea
and pigeon pea to the total area cultivated under pulses are 35% and 16% respectively.
Subsequently, China, Ethiopia and Myanmar are selected for kidney beans, Australia,
Canada, US and Ukraine are selected for peas, Tanzania, Mozambique and Myanmar are
selected for pigeon pea, Australia, Canada and Ethiopia are selected for chickpea.
Nominal exchange rates and the Consumer Price Index (CPI) to compute real exchange
rates for the importing countries were obtained from the OANDA and the World Bank
database1. The data analysis is undertaken using quarterly data and the period of analysis
is from 2002 to 2017. However, for pigeon pea, two types of data set have been used. The
currency of major importer of pigeon pea - Mozambique - redenominated the metical at a
rate of 1000:1 on 1 July 2006 owing to inflation. Due to the lack of availability of data prior
to 2006, the present study make use of the exchange rates based on both the new and old
currencies. The exchange rates were available for old currency till 2007. The exchange
rates based on new currency was available from 2008 onward. Also due to the lack of
considerable import of pigeon pea from 2002-2004, the present study of pigeon pea is
from 2004 to 2017 for pigeon pea based on old currency exchange rate and 2008 to 2017
based on new currency exchange rate of Mozambique. The data is unbalanced for most
1
OANDA is a website from where we obtained the exchange rates. And even though OANDA appears in
uppercase, it is not an acronym.
of the pulses import as the import of pulses were missing in some quarters from some
countries.
In order to calculate the real exchange rate for the importing countries, the nominal exchange
In order to calculate the real exchange rate for the importing countries, the nominal
rates wererates
exchange multiplied with the consumer
were multiplied with the price index Price
Consumer (CPI) Index
of India andofdivided
(CPI) it bydivided
India and CPI of
itthe
by respective
CPI of the countries
respective(Knetter (1989);
countries Pick 1989);
(Knetter and Park
Pick(1991); Pall(1991);
and Park et al. (2013)). Finally,
Pall et.al., in
(2013).
Finally,
additionintoaddition to the
the above aboveand
nominal nominal and realrates,
real exchange exchange rates, we incorporate
we incorporate the commodity- the
commodity-specific (export) trade-weighted exchange rate, as developed by Goldberg
specific (export) trade-weighted exchange rate, as developed by Goldberg (2004) and a
(2004) and a variant applied by Miljkovic and Zhuang (2011). To calculate the commodity-
variant applied by Miljkovic and Zhuang (2011). To calculate the commodity-specific
specific (export) trade-weighted exchange rate, we use the real exchange rates computed
(export)
and trade-weighted
the weights exchange inrate,
of each importer the we use theformula:
following real exchange rates computed and the
weights of each importer in the following formula:
𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝
𝑝𝑝𝑝𝑝 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 𝑋𝑋𝑋𝑋𝑡𝑡𝑡𝑡
𝑋𝑋𝑋𝑋𝑋𝑋𝑋𝑋𝑋𝑋𝑋𝑋𝑡𝑡𝑡𝑡 = � 𝑤𝑤𝑤𝑤𝑡𝑡𝑡𝑡 . 𝑋𝑋𝑋𝑋𝑋𝑋𝑋𝑋𝑋𝑋𝑋𝑋𝑡𝑡𝑡𝑡𝑝𝑝𝑝𝑝 , 𝑤𝑤𝑤𝑤ℎ𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 𝑤𝑤𝑤𝑤𝑡𝑡𝑡𝑡 = (8)
𝑝𝑝𝑝𝑝
∑𝑝𝑝𝑝𝑝 𝑋𝑋𝑋𝑋𝑡𝑡𝑡𝑡𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 (8)
where is the 𝑝𝑝𝑝𝑝 export weighted (real) exchange rate for commodity p at time period t
where 𝑋𝑋𝑋𝑋𝑋𝑋𝑋𝑋𝑋𝑋𝑋𝑋𝑡𝑡𝑡𝑡 is the export weighted (real) exchange rate for commodity p at time period t
(here commodity p refers to cereal preparations, dairy, fresh onion, groundnut and guar
(here commodity p refers to cereal preparations, dairy, fresh onion, groundnut and guar gum
gum products); is the export weight assigned to the importing country i ; and is the real
𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝
products);rate
exchange 𝑤𝑤𝑤𝑤𝑡𝑡𝑡𝑡 betweenis the export
Indiaweight assignedi.to the importing country i ; and 𝑋𝑋𝑋𝑋𝑋𝑋𝑋𝑋𝑋𝑋𝑋𝑋𝑡𝑡𝑡𝑡𝑝𝑝𝑝𝑝 is the real
and country
exchange rate between India and country i.
7.6 Results and Discussion
The
7.6 PTM model
Results (equation
and 7) is estimated using the linear regression with panel corrected
Discussion
standard errors (PCSE)2 alongwith accounting for panel-level heteroskedastic errors
and
The errors contemporaneously
PTM model (equation 7) is correlated across
estimated using thepanels. The analysis
linear regression is undertaken
with panel corrected
under three exchange rate models: nominal, real and commodity-specific (export trade
standard errors (PCSE) 2 alongwith accounting for panel-level heteroskedastic errors and
weighted) exchange rates.
errors contemporaneously correlated across panels. The analysis is undertaken under three
exchange
The rate results
R-squared models:fornominal,
all threereal and commodity-specific
exchange (export
rate models showed that trade weighted)
the pricing to
market behaviour
exchange rates. is better predicted under the commodity-specific exchange rate model
for peas and kidney beans, whereas under nominal exchange rate model for pigeon pea
and
Thechickpea.
R-squared results for all three exchange rate models showed that the pricing to market
behaviour is better predicted under the commodity-specific exchange rate model for peas and
The results generally showed that the impact of exchange rate effects on import prices
kidney beans, whereas under nominal exchange rate model for pigeon pea and chickpea.
were statistically significant for all the products and in the case of most of the importing
countries.
The resultsThis also means
generally showedthe thatexchange
the impactrate pass through
of exchange was incomplete
rate effects or partial
on import prices were
and as a result the importers have a non-competitive pricing behaviour in general. The
statistically significant for all the products and in the case of most of the importing countries.
β coefficient exhibited statistically significant relationship in the case of Ethiopia and
This also means
Myanmar the exchange
for kidney rate pass through
beans, Australia and US was incomplete
for peas, or partial
Australia, and and
Canada as a Ethiopia
result the
importers have a non-competitive pricing behaviour in general. The β coefficient exhibited
2
The PCSE is estimated by specifying the panel specific AR(1) form of auto correlation for those products that identified an
AR1 autocorrelation structure
2 The PCSE is estimated by specifying the panel specific AR(1) form of auto correlation for those products that
identified an AR1 autocorrelation structure
for chickpea, Tanzania and Myanmar for pigeon pea (old currency) (see tables 7.3, 7.6,
7.7 & 7.10). The analysis based on new currency of Mozambique also showed significant
exchange rate effect in the case of Myanmar (see table 7.3).
First we will discuss the results of commodity specific exchange rate models for peas and
kidney beans and nominal exchange rate model results for pigeon pea and chickpea.
Commodity Specific Exchange Rate Model for Kidney Beans

As mentioned already commodity specific exchange rate model was the best in predicting
the pricing behaviour of the importers so our discussion of the results will focus on
commodity specific exchange rate model for kidney beans. The results from the analysis
based on commodity specific exchange rate model for peas showed that the exchange rate
effect was significant in the case Ethiopia and Myanmar. In other words, exchange rate
changes were only partially reflected in the import prices of kidney beans from Ethiopia
and Myanmar indicating the non-competitive pricing behaviour of importers of kidney
beans. The sign of the bet coefficient was negative for both countries and this showed
local currency price stabilisation. Therefore, change in import prices with respect to the
changes in exchanges were inverse. In other words, a 1% appreciation in Indian currency
was leading to 2% decline in the import price of Ethiopian and Myanmar prices of kidney
beans imported to India. This shows the residual demand is elastic, which is an indicator
of competitive behaviour (Varma and Issar, 2016).
The country specific effect was also positive in the case of Ethiopia and Myanmar as
compared to China indicating the prices of kidney beans from these two countries were
higher than Chinese price of kidney beans. The interaction of dummy variable with
exchange rate changes to capture the asymmetric effect was not significant in this model
(see table 7.1).
The demand schedule faced by the exporters are more concave than a constant elasticity
of demand when there is local currency stabilisation along with country specific effects
(βi < 0 and λi ≠ 0) (Varma and Issar, 2016).
Commodity Specific Exchange Rate Model for Peas

As mentioned already commodity specific exchange rate model was the best in predicting
the pricing behaviour of the importers so our discussion of the results will focus on
commodity specific exchange rate model for peas. The results from the analysis based on
commodity specific exchange rate model for peas showed that the exchange rate effect
was significant in the case of imports from Australia and US. The sign of the coefficient
was negative indicating local currency stabilisation. In other words, a 1% appreciation
in currency was leading to 4% decline in the import price for Australia and 5% decline
in the import price for US. The country specific effect was not significant in this model
indicating the prices charged by Australia, US and Ukraine were not statistically different
from Canadian price (see table 7.2).
Nominal Exchange Rate Model for Chickpea

As mentioned, the nominal exchange rate model better predicted the pricing behaviour
of imported chickpea. The results from the analysis showed that exchange rate effect was
significant in the import pricing of all the three major importers of chickpea-Australia,
Canada and Ethiopia. The sign of the bet coefficient was negative in the case of Australia
and Canada where as it was positive in the case of Ethiopia. This shows that Ethiopia
was practicing amplification of exchange rate whereas the other two were practising local
currency stabilisation (see table 7.3). The country specific effect was also significant for
Australia and Ethiopia as compared to US. This is indicating significant price differences
across importers. Dummy variable to capture the asymmetric effect was significant and
positive for Australia indicating an appreciation of exchange rate had a significant impact
on the import prices from Australia.
Nominal Exchange Rate Model for Pigeon pea

The nominal exchange rate models better predicted the pricing behaviour of pigeon
pea analysis based on both the currencies. The results from the analysis showed that
the exchange rate effect was statistically significant and negative in the case of two out
of three major importers of pigeon pea-Tanzania and Myanmar. The sign was negative
indicating these countries are practicing local currency price stabilisation. However, the
market specific effect was significant for Mozambique indicating that though exchange
rate pass through is complete, the prices charged by Mozambique was lower than the
other importers and the mark up of price over cost remain to be constant. This can also be
due to the quality difference in pigeon pea imported by Mozambique as compared to the
other two countries. Dummy variable to capture the asymmetric effect was not significant
in this model.
When we analysed the PTM using the new currency of Mozambique only for the period
2008 to 2017 showed that exchange rate was significant in the case of import from Myanmar.
As in the case of old currency model, the sign of the coefficient was negative indicating
local currency stabilisation by Myanmar (see table 7.4). However, the country specific
effect was significant and negative for Mozambique and Tanzania indicating differential
prices for imported pigeon pea. Dummy variable to capture the asymmetric effect was not
significant in this model.
Table 7.1: Results of the PTM Model for Kidney Beans - Commodity Specific Exchange Rate Model
Exchange Country Asymmetric
Country Z-Statistic Z-Statistic Z-Statistic
Rate Effect Specific Effect Effect
China -0.02 -1.37 * * 0.01 0.59
(0.02) * (0.02)
Ethiopia -0.02 -2.25** -0.4 -5.13*** 0.01 0.71
(0.01) 0.07 0.02
Myanmar -0.02 -2.32** -0.15 -3.18*** -0.01 -0.52
(0.01) 0.05 0.02
Observations 172
47.97
Wooldridge Test
(0.0202)
R-squared 0.9824
2586.29
Wald chi-sq.
(0.0000)
Notes: Standard errors are in brackets. The superscripts *, ** and *** denote statistical significance at the 10%, 5% and
1% levels, respectively. For the cross-sectional specification, China is the intercept. Wooldridge Autocorrelation Test null
hypothesis is no first-order autocorrelation (p-values in brackets).
Table 7.2: Results of the PTM Model for Peas - Commodity Specific Exchange Rate Model
Country
Exchange Asymmetric
Country Z-Statistic Specific Z-Statistic Z-Statistic
Rate Effect Effect
Effect
Australia -0.04 -3.81*** -0.09 -0.91 0.03 1.46
(0.01) (0.10) (0.02)
Canada -0.02 -0.93 0.04 2.27**
(0.02) (0.02)
US -0.05 -4.66*** -0.01 -0.18 -0.01 -0.7
(0.01) (0.08) (0.03)
Ukraine -0.01 -0.95 0.01 0.08 0.02 0.81
(0.01) (0.07) (0.02)
Observations 232
13.2551
Wooldridge Test
(0.0357)
R-squared 0.9831
3889.50
Wald chi-sq.
(0.0000)
1% levels, respectively. For the cross-sectional specification, Canada is the intercept. Wooldridge Autocorrelation Test null
Table 7.3: Results of the PTM Model for Chickpea - Nominal Exchange Rate Model
Exchange Rate Country Specific Asymmetric
Effect Effect Effect
Australia -0.47 -1.76* 1.95 3.04*** 0.07 2.28**

(0.27) (0.64) (0.03)
Canada -1.03 -3.16*** * * 0.03 0.94
(0.33) * (0.03)
Ethiopia 0.84 3.58*** 4.92 3.23*** -0.02 -0.44
(0.23) (1.52) (0.04)
Observations 152
Wooldridge 406.457
Test (0.0025)
R-squared 0.9740
1728.12
Wald chi-sq.
(0.0000)
Table 7.4: Results of the PTM Model for Pigeon Pea - Nominal Exchange Rate Model (old currency)
Tanzania -0.16 -1.75* -0.55 -0.89 -0.01 -0.55

(0.09) (0.62) (0.03)
Mozambique 0.01 1.41 -1.53 -2.99** 0.00 -0.07
(0.01) (0.51) (0.02)
Myanmar -0.47 -3.11*** * * 0.01 0.27
(0.15) * (0.02)
Observations 157
43.225
Wooldridge Test
(0.0224)
R-squared 0.9844
4391.99
Wald chi-sq.
(0.0000)
Notes: Standard errors are in brackets. The superscripts *, ** and *** denote statistical significance at the 10%, 5% and 1%
levels, respectively. For the cross-sectional specification, Myanmar is the intercept. Wooldridge Autocorrelation Test null
Table 7.5: Results of the PTM Model for Pigeon Pea - Nominal Exchange Rate Model (new currency)
Country
Exchange Rate Asymmetric
Effect Effect
Effect
Tanzania -0.08 -0.78 -1.84 -2.59** 0.01 0.47
(0.10) (0.71) (0.02)
Mozambique 0.01 0.76 -1.70 -2.46** -0.01 -0.34
(0.01) (0.69) (0.03)
Myanmar -0.53 -2.61** * * 0.03 1.18
(0.20) * (0.02)
Observations 111
Wooldridge Test 29.004 (0.0328)
R-squared 0.9805
Wald chi-sq. 1237.35 (0.0000)
7.7 Conclusion
The analysis of pulses imports pricing behaviour by major importers based on PTM model
with panel corrected standard errors (PCSE) estimation technqiue broadly indicated
the presence of non-competitive pricing behaviour of India’s importers due to both the
exchange rate induced effects as well as market specific characteristcs. The significance of
the exchange rate parameter βi and the country-specific effects parameter λi in most of the
models indicates that the importers work with a fluctuating exchange rate and a varying
mark-up over marginal cost. The analysis of the asymmetric effects of exchange rates
through an interaction dummy showed that for majority of the products appreciation of
the Indian rupee against the partner country had greater impact than the depreciation.
The analaysis of the exchange rate effect showed that local currency price stabilization
by the Indian importers was more prominent than the amplification of exchange rates.
This is indicating competition among other importers.
Appendix
Table A7.1: Results of the PTM Model for Pigeon Pea - Real Exchange Rate Model (new currency)
Exchange Rate Country Asymmetric
Effect Specific Effect Effect
Tanzania -0.03 -1.30 -0.16 -1.13 0.02 0.57

0.02 0.14 0.03
Mozambique 0.01 0.58 -0.07 -0.46 0.03 1.06
0.01 0.15 0.03
Myanmar -0.05 -1.14 * * 0.04 1.44
0.04 * 0.03
Observations 110
R-squared 0.9612
Wald chi-sq. 1118.35 (0.0000)
Table A7.2: Results of the PTM Model for Pigeon Pea - Commodity Specific Exchange Rate Model (new
currency)
Country
Exchange Asymmetric
Rate Effect Effect
Effect
Tanzania 0.01 1.52 -0.09 -2.00 0.01 ###

0.01 0.04 0.03
Mozambique -0.02 -1.11 * * 0.00 0.1
0.01 * 0.03
Myanmar 0.01 0.89 -0.14 -3.66 0.03 1.2
0.01 0.04 0.03
Observations 109
286.701
Wooldridge Test
(0.0035)
R-squared 0.9681
1173.97
Wald chi-sq.
(0.0000)
levels, respectively. For the cross-sectional specification, Mozambique is the intercept. Wooldridge Autocorrelation Test
null hypothesis is no first-order autocorrelation (p-values in brackets).
Table A7.3: Results of the PTM Model for Kidney Beans - Nominal Exchange Rate Model
Exchange Rate Country Specific Asymmetric
Effect Effect Effect
China -0.09 -0.62 0.50 0.03 1.96*

(0.13) (0.02)
Ethiopia -0.08 -0.72 -0.30 0.05 2.75**
(0.12) (0.38) (0.02)
Myanmar -0.01 -0.46 0.04 1.26 -0.04 -2.27**
(0.01) (0.27) (0.02)
Observations 182
Wooldridge
100.3 (0.009)
Test
R-squared 0.972
1882.25
Wald chi-sq.
(0.0000)
levels, respectively. For the cross-sectional specification, Ethiopia is the intercept. Wooldridge Autocorrelation Test null
Table A7.4: Results of the PTM Model for Kidney Beans - Real Exchange Rate Model
China -0.02 -1.13 0.01 0.49

0.02 0.02
Ethiopia -0.05 -2.53** -0.37 -5.8*** -0.01 -0.52
0.02 0.06 0.02
Myanmar -0.01 -1.14 -0.14 -3.43*** 0.01 0.39
0.01 0.04 0.02
Observations 172
137.65
Wooldridge Test
(0.0072)
R-squared 0.978
2102.59
Wald chi-sq.
(0.0000)
1% levels, respectively. For the cross-sectional specification, China is the intercept. Wooldridge Autocorrelation Test null
Table A7.5: Results of the PTM Model for Peas - Nominal Exchange Rate Model
Country
Exchange Asymmetric
Rate Effect Effect
Effect
Australia -0.03 -0.49 -0.18 -0.42 -0.02 -0.6

0.07 0.43 0.3
Canada -0.08 -1.12 -0.48 -1.17 -0.015 -0.74
0.07 0.41 0.02
US -0.01 -0.08 -0.004 -0.13
0.11 0.03
Ukraine 0 0.05 -0.16 -0.34 -0.02 -0.78
0.03 0.48 0.02
Observations 239
R-squared 0.9450
5280.63
Wald chi-sq.
(0.0000)
1% levels, respectively. For the cross-sectional specification, US is the intercept. Wooldridge Autocorrelation Test null
Table A7.6: Results of the PTM Model for Peas - Real Exchange Rate Model
Country
Exchange Asymmetric
Rate Effect Effect
Effect
Australia 0.11 2.59** * * 0 0.01

0.04 * 0.02
Canada 0.05 2.25** -0.26 -2.17** 0.02 0.78
0.02 0.12 0.02
US 0.00 -0.17 -0.25 -1.97* 0.05 1.59
0.02 0.13 0.03
Ukraine 0.00 -0.25 -0.43 -3.49*** 0.01 0.57
0.01 0.12 0.02
Observations 232
R-squared 0.9669
2907.71
Wald chi-sq.
(0.0000)
levels, respectively. For the cross-sectional specification, Australia is the intercept. Wooldridge Autocorrelation Test null
Table A7.7: Results of the PTM Model for Chickpea - Real Exchange Rate Model
Australia -0.07 -0.86 * * -0.01 -0.32

0.08 * 0.04
Canada 0.01 0.12 0.40 1.97 -0.06 -1.52
0.06 0.20 0.04
Ethiopia -0.09 -2.31 0.07 0.31 0.00 -0.07
0.04 0.22 0.04
Observations 153
Wooldridge 120.815
Test (0.0082)
R-squared 0.9674
Wald chi-sq. 997.21 (0.0000)
levels, respectively. For the cross-sectional specification, Australia is the intercept. Wooldridge Autocorrelation Test null
Table A7.8 Results of the PTM Model for Chickpea - Commodity Specific Exchange Rate Model
Australia -0.11 -4.12 -0.46 -3.39 0.05 1.56

0.03 0.14 0.03
Canada -0.01 -1.09 * * 0.02 0.52
0.01 * 0.04
Ethiopia -0.03 -2.32 -0.20 -1.52 -0.03 -0.67
0.01 0.13 0.05
Observations 153
Wooldridge
21.399 (0.0437)
Test
R-squared 0.9673
1628.53
Wald chi-sq.
(0.0000)
Table A7.9: Results of the PTM Model for Pigeon Pea-Real Exchange Rate Model (old currency)
Tanzania -0.03 -1.50 -0.01 -0.05 0.03 1.33

0.02 0.15 0.02
Mozambique 0.01 1.63 -0.09 -0.73 0.00 0.13
0.01 0.12 0.02
Myanmar -0.05 -1.32 * * 0.01 0.45
0.04 * 0.02
Observations 155
179.074
Wooldridge Test
(0.0055)
R-squared 0.9736
4366.21
Wald chi-sq.
(0.0000)
Table A7.10: Results of the PTM Model for Pigeon Pea - Commodity Specific Exchange Rate Model (old
currency)
Country
Exchange Asymmetric
Rate Effect Effect
Effect
Tanzania -0.01 -1.59 -0.07 -2.00 -0.03 -1.17

0.01 0.03 0.02
Mozambique 0.00 0.66 * * -0.05 -2.40
0.01 * 0.02
Myanmar 0.00 -0.27 -0.09 -3.69 0.00 0.05
0.01 0.03 0.02
Observations 155
104.108
Wooldridge Test
(0.0095)
R-squared 0.9821
4334.20
Wald chi-sq.
(0.0000)
levels, respectively. For the cross-sectional specification, Mozambique is the intercept. Wooldridge Autocorrelation Test
null hypothesis is no first-order autocorrelation (p-values in brackets).
Chapter Minimum Support
08 Price Policies
8.1 An Overview of Government Interventions in Agriculture

A defining feature of agricultural economic policy making in India until the nineties has
been its inward orientation with high government intervention. The intervention was
indispensable in an economy like India where agriculture inherited a very inequitable
socio- economic structure mainly due to the feudal production structure. The high rate
of growth of population on the one side and the sluggishness of the industrial sector on
the other side gave rise to a very high demand for land. The unequal distribution of land
resulted in a sharecropping system that accords monopoly power to the landlords reflected
in their high share of production and monopoly power to evict the tenants from their
land (Bhattacharya et.al., 1996). These inequalities and imperfections in the agricultural
market prompted the government to intervene in the market with multiplicity of tools.
Initially, the government intervention began in the agricultural market with the aim
of the reduction of inequalities by removing the production bottlenecks and thereby
promoting agricultural growth. Later, the economic policy framework for the agricultural
sector indeed went a long way with the objective of achieving self-sufficiency in food
production on the one hand and agrarian surplus for investment in industrial sector
on the other. This approach is best illustrated in the context of direct interventions and
indirect interventions in the agricultural market. Direct interventions include price policy
by employing tariffs as well as more direct measurers of control on trade, such as bans,
quotas, minimum export prices and intervention in the domestic market through state
subsidies and government procurement. Indirect interventions include economy-wide
import substitution policies and the overvaluation of real exchange rates that arise from
high rates of domestic inflation and lags in adjusting the nominal exchange rate.
In the wake of Bengal Famine of 1943, A Food-grains Policy Committee was appointed
under the chairmanship of George Theodore which called upon the attention of the
government to the importance of rationing. Further, India struggled with a number of
price controls on essential agricultural commodities post-independence. In 1964, another
committee, Food-grains Prices Committee, was appointed by the government under the
chairmanship of L.K. Jha, which led to the formation of Food Corporation in India (FCI)
and the Agricultural Prices Commission (APC) in 1965.
The objective of APC was to determine a balanced and well-integrated price policy that would
be fair to both producers and consumers. Agricultural price policy plays an important role
in the economic development of an agrarian economy. The Food Corporation of India
(FCI) was also established in the same year with the objective of stabilising food prices.
Until the establishment of both APC and FCI, the primary concern of the government’s food
price policy was the stabilisation of the food prices for the consumer with little concern or
recognition of the role of price incentives for encouraging production of the producers. To
protect the farmers from the fluctuations in the agricultural prices and to incentivize them
to continue farming, the Government of India started to announce procurement or support
prices for major agricultural commodities. Further, the government also proposed a price
policy in order to stabilize the general prices and promote an increase in production. The
government introduced minimum support prices for rice and wheat. A positive agricultural
price policy results in the stabilization of prices, increase in the overall production and
most importantly, an increase in the income of the farmers. A proper price policy also
leads to an effective and judicial use of the resource endowments. Further, it leads to the
formation of better price policies in the areas of marketing, extension services, growth in
agricultural inputs, etc.
Till the formation of APC and FCI, the requirements of the Public Distribution Systems
(PDS) were met primarily with imports rather than domestic procurement (Sukhatme and
Abler, 1997). Domestic procurement was small and procurement prices were set on an ad hoc
basis. The APC formalised the process of setting procurement prices by more systematically
taking into account cost of production and past trends in prices. The FCI is the government’s
principal agency for domestic procurement, storage, public distribution and foreign trade
in food grains.
Over the years several policies related to agricultural prices have been devised and all of
them serve nearly the same purposes, of increasing the production, stabilizing the prices
and maintaining adequate stocks of food-grains (Report, Food-grains Policy Committee,
1957).
The APC, later renamed as the Commission for Agricultural Costs and Prices (CACP),
provided detailed suggestions to the government regarding interventions in the
agricultural markets and price support policies. Procurement prices recommended by the
CACP are usually acceptable to the Government of India. The commission recommends
the procurement prices for wheat and rice “in the perspective of the overall needs of
the economy and with due regard to the interests of the producers and consumers”.
Apparently, when recommending prices, the CACP considers production costs, domestic
prices, world prices, effects of price changes on living costs and industrial production
costs and the desire to maintain some predetermined intercrop price parity (Sukhatme
and Abler, 1997). However, there is no formula per se. The intervention broadly aimed
stabilising the prices which are prone to short-term price fluctuations (Kahlon and Tyagi,
1983; Chandra, 1985; Zant, 1998).
The decline in prices as well as the increase in prices had policy implications. For example,
the unrestrained increase in the price of agricultural commodities would affect the
standard of living of the masses and the other sectors of the economy because agriculture
provides wage goods to the industrial sector. Moreover, the change in agricultural prices
would have an adverse impact on the distribution of income between the agricultural and
nonagricultural sectors of the economy. Ostensibly, the price policy in India resulted in
artificially kept prices which were either below or above the world prices.
In the case of rice, for much of the 1960s and 1970s, open-market prices and procurement
prices were far below world prices. It was only after the big drop in world rice prices in
the 1980s that Indian market prices came close to world rice prices (Sukhatme and Abler,
1997). In the case of wheat, there was an interesting shift in the policy regime. Prior to the
mid–1970s, domestic wheat prices exceeded the world prices; since that time, the opposite
has been the case. With domestic production of wheat growing rapidly under the Green
Revolution, the government was unwilling to pass the large world price increases of the
mid–1970s on to domestic markets. In the mid–1980s, the world price of wheat was about
40 % above the open-market producer price and about 55% above the procurement price.
Government controls over trade and capital flows during the past decades accounted for
these large differences between domestic and world prices.
Foreign trade in agricultural commodities in most cases was guided by “residuary surplus
factor”, i.e. the agricultural commodities were allowed to be exported when there existed
surplus after meeting the domestic requirements. Similarly, the import was mainly done
to meet the excess demand and thereby to prevent the upward movement of the domestic
prices (Nayyar and Sen, 1994; Thimmaiah and Rajan, 2002). As a result, the domestic
prices were controlled primarily by the domestic demand and supply conditions and were
isolated from the world prices. Therefore, an important feature of the trade regime was a
restrictive trade policy with strict regulation of both imports and exports of agricultural
commodities. Thus, the trade regime in most cases aimed to provide protection to the
domestic producers and consumers by insulating the domestic economy from external
shocks.
However, the trade policy regime, especially the import substitution strategy, came in
for severe criticism by the World Bank, IMF and academic proponents of structural
adjustment, during the 1970s and 1980s (Bhalla, 1994). The critics argued that both
the overall planning framework and sector specific governmental policies have been
discriminatory against agriculture. Discrimination had been inherent in the import
substitution strategy of industrialisation adopted by the country for several reasons. It
was argued that the high protection accorded to industry raised the relative prices of
modern farm inputs for the agricultural sector and thereby implicitly taxed agriculture.
The protectionist trade regime, which resulted in the non-alignment of internal prices
with border prices, resulted in inefficiency of resource use, distorted the cropping pattern
and also prevented the producers from deriving benefits of comparative advantage in
agriculture (Bhalla, 1994; Gulati, 1998).
India does not provide generally any product-specific support other than market price
support which is implemented through a device of ‘Minimum Support Prices’ (hereafter
MSP). The commodities included in the minimum support price policies were paddy rice,
wheat, coarse cereals, various pulses, various oilseeds, sugarcane, cotton and tobacco
(Orden et.al., 2007). For wheat, the MSP is paid directly to farmers in the primary markets
where they sell their grain. For rice, about half of total procurement is purchased in
primary markets in the form of paddy at MSP and about half is purchased as milled rice
through a statutory, fixed price levy imposed on rice millers in some states (Jha et.al.,
2007). Under the levy, millers are obligated to deliver a share of the rice they process to the
government at a fixed, below-market price. The levy shares vary from State to State (from
a low of 10 percent to a high of 75 percent). The farmers in states with high levies receive
farm price which is below the MSP. Grain procured by government is stored by the FCI.
The FCI either makes the grain available to State governments for subsidized distribution
or, when conditions permit, allocates surplus grain for export (Jha et.al., 2007).
8.2 Minimum Support Prices Scheme

Surplus production in a year usually results in the sharp decline in price of an agricultural
commodity. To cushion the farmers against the unexpected and inevitable losses, the
Government of India came up with the concept of Minimum Support Price Scheme
in 1966-67. Minimum Support Price or MSP continues to be as an integral part of the
country’s price policy, is announced by the government in order to protect the farmers
from the shocks or volatility in the food market. The MSPs are decided based on the
recommendations of Commission for Agricultural Costs and Prices (CACP). CACP puts
forward recommendations separately for both the seasons – Kharif and Rabi. The
calculation of MSP is largely based on the cost of production which takes into account
the variable cost, land rental value, the imputed value of family labour and a 10 percent
return to family labour (Jha et.al., 2007). The attempt to eliminate quantitative restrictions
on cereal exports in the second half of the 1990s benefited producers as the world
price for cereals at that time was quite high. However, a fall in world prices in the late
nineties paved way for an additional pressure for increasing MSP in order to compensate
producers’ losses due to low world price. The basic staples in India, therefore, continue
to be subject to MSP to the farmers, even though the government interventions in the
market to procure crops have weakened.
The MSP serves the objectives of ensuring stable price environment for the farmers,
preventing the farmers from the distress selling of their produce and procuring food grains
for the Public Distribution System, among others. Government through MSPs, incentivizes
the farmers in order to maintain an adequate amount of food grain production in the
economy. At present, 24 crops are covered under this scheme, including seven cereals
(paddy, wheat, barley, jowar, bajra, maize and ragi); five pulses (gram, arhar/tur, moong,
urad and lentil); eight oilseeds (groundnut, rapeseed/mustard, toria, soybean, sunflower
seed, sesame, safflower seed and niger seed); copra, raw cotton, raw jute and virginia
flu cured (VFC) tobacco. Procurement of the crops is done by the Food Corporation of
India (FCI) for release through the PDS. Other interventions such as Market Intervention
Schemes (MIS), various Price Support Schemes (PSS) etc., are used for the procurement of
crops that are not covered under the MSP scheme. The MSP announced for various pulses
is given in table 8.1. The MSP figures shows that there has been an increase in the MSP for
almost all the crops. The MSP for pigeon pea (arhar) increased from Rs. 2300 per quintal
in 2009-10 to Rs. 5675 per quintal in 2018-19. Similarly, the MSP for gram increased from
Rs. 1760 in 2009-10 to 4620 in 2018-19 (see table 8.1).
Table 8.1: Minimum Support Prices of Various Pulses in Rs Per Quintal

2009- 2010- 2011- 2012- 2013- 2014- 2015- 2016- 2017- 2018-
crops
10 11 12 13 14 15 16 17 18 19
Khariff
Tur(arhar) 2300 3000 3200 3850 4300 4350 4625 5050 5450 5675
Moong 2760 3170 3500 4400 4500 4600 4850 5225 5575 6975
Urad 2520 2900 3300 4300 4300 4350 4625 5000 5400 5600
Rabi
Gram 1760 2100 2800 3000 3100 3175 3425 4000 4400 4620
Lentils(Masur) 1870 2250 2800 2900 2950 3075 3325 3950 4250 4475
Source: CACP
Awareness of MSP and Procurement Agency Among farmers

The successful implementation of a scheme can be achieved only if the targeted population
is aware of most of the aspects of a scheme. Failure to do so can never lead to an effective
policy implementation. Regarding MSP, the farmers need to be aware of prevailing MSP,
time of their announcements and the process of procurements, the facilities provided by
the government and the payment mechanism.
A survey conducted by the National Sample Survey Organization (NSS Report 2012-13)
collected information on the awareness of the agricultural households regarding the
minimum support prices. The households considered were the ones which have reported
the sale of their harvested crops. The data showed that the awareness of MSP and
procurement agency were pretty low among the households. The data of % of farmers
(number per 1000 households) who are aware of MSP for various crops is given in table
8.2. It can be observed that the awareness of MSP was the highest for wheat, paddy and
sugar cane the lowest for pulses. Among various pulses, the awareness was the lowest
for pigeon pea (arhar), lentils (moong) and chickpea (gram) (see table 8.2). The poor
awareness of MSP was reflected in the poor awareness of procurement agency as well. But
what was more striking was the percentage of people who sold their crop to procurement
agencies were lower than the percentage of people who had awareness about procurement
agencies. Similarly, percentage of sale at MSP was also lower. A study conducted by NITI
Aayog in 2016 also highlighted state-wise differences in awareness levels and lacunas in
MSP announcements.
Table: 8.2: Awareness about Minimum Support Price (MSP)

Number per 1000 of agricultural households reported sale of crops having awareness about MSP
number per 1000 of households of the households sold to
reporting sale of crops procurement agency
Aware of Sold to % of sale Average sale
Aware of
Crop procurement procurement at MSP to rate received at
MSP (%)
agency (%) agency (%) total sale MSP (₹ per Kg.)
July 2012- December 2012
Paddy 32.2 25.1 13.5 27 13.08
Arhar(tur) 4.6 3.8 1.3 1 35.47
Urad 5.7 3.7 1.6 1 37.61
Moong 9.8 7.2 1.8 1 53.33
Sugarcane 39.8 36.1 31 34 2.79
January 2013- June 2013
Paddy 31.5 18.7 10 14 13.15
Wheat 39.2 34.5 16.2 35 13.99
Gram 12.6 9.7 3.9 5 29.96
Arhar(tur) 14.2 13.1 4.7 1 47
Moong 9.1 3.7 1.9 2 58
Masur 18.1 15.5 2 0 36
Sugarcane 45.4 40.7 36.6 33 3.25
Source: NSSO Some Aspects of Farming
Price Deficit Financing Scheme
Price Deficit Financing Scheme or Bhavantar Bhugtan Yojana (BBY) is a pilot scheme
launched by the Government of Madhya Pradesh, in which it transfers the difference
between the MSP and Modal Rate directly in the bank accounts of the farmers. Modal
rate is the average price of a particular commodity in APMCs of MP and of two other
neighboring states.
The Scheme was launched in the aftermath of the massive farmers’ protest in Mandsaur
district of the state, in which six farmers were killed in police firing. The objective is to avoid
the harm done to the farmers due to the volatility in prices of agricultural commodities,
mainly oilseeds and pulses.
Under this scheme, the government does not procure food grains from the farmers
as it would under the MSP scheme, hence minimizing government intervention. The
government pays for the difference between the MSP of a commodity and the Modal
rate if the commodity is auctioned at a price higher or equal to the latter. The scheme
was initially launched for 8 notified Kharif crops—soybean, moong, urad, pigeon pea,
groundnut, maize and oilseeds, and was further extended to 4 Rabi crops—chickpea,
mustard, lentils and onions.
Wholesale Prices and MSP for Major Pulses

The whole sale prices of pigeon pea, lentils, black gram and chickpea were below were
higher than the MSP during 2009 to 2018 (see appendix figures from 8.1 to 8.5). The whole
sale prices of pigeon pea and chickpea were more or less converged across different zones
(see appendix figures 8.6 & 8.7).
8.3 Procurement Policy and Operations

In order to achieve the objective of national food security, the Government of India has
established the Public Distribution System (PDS) through which food grains, kerosene,
sugar etc., are made easily accessible to the class which is at the bottom of the income
pyramid, at subsidized rates. The central government procures, stores, allocates and
transports the food grains while the state government distributes the commodities among
consumers through Fair Price Shops (FPS) ration shops.
The scheme was launched in June 1947 and the agency responsible for the procurement
of food grains is the Food Corporation of India (FCI). The pulses procurement undertaken
by National Agricultural Cooperative Marketing Federation of India (NAFED) is given in
table 8.3. The quantity of chickpea procured in 2014-15 was much higher than the previous
year. Maharashtra, Andhra Pradesh and Karnataka were the major states for procurement.
Whereas in the year 2014-15, Gujarat, Madhya Pradesh, Uttar Pradesh and Rajasthan were
also added to the list. As far as the black gram (urad) is concerned the procurement was
the highest in 2013-14. For pigeon pea (arhar) the procurement was the highest in 2012-13.
Maharashtra, Andhra Pradesh and Madhya Pradesh were the major states for procuring
pigeon pea (arhar).
Table 8.3: Procurement of Pulses under PDS by NAFED

Quantity
Rupees
Commodity Year procured (Million Major State of procurement
(Lakhs)
Tons)
Gram 2013-14 34306 10736.57 Maharashtra, AP, Karnataka
Maharashtra, Gujarat, MP, UP,
2014-15 279611.125 94123.66
Rajasthan, Karnataka
Urad 2012-13 1.57 0.63 Rajasthan
Maharashtra, AP, UP, MP, Gujarat, W.B.
2013-14 77050.806 34543.75
,Rajasthan, Karnataka, Jharkhand
2014-15 7453.262 3611.45 Jharkhand, WB, AP, Maharashtra, UP
2015-16 6.70 6.56 Maharashtra
Arhar 2012-13 16004.835 6328.15 Maharashtra, AP,MP
2013-14 42693 18755.12 Maharashtra, AP
2014-15 1079.648 1069.87 Maharashtra, AP
Moong 2016-17 8267.58 3968.43 Maharashtra & Karnataka
Source: NAFED
The major organizations involved in the procurement of agricultural commodities are

- National Agricultural Cooperative Marketing Federation of India (NAFED), National
Cooperative Consumers Federation of India (NCCF), Small Farmers’ Agri-Business
Consortium (SFAC) and Central Warehousing Corporation (CWC). The procurement of
kharif pulses by various agencies in the year 2016-17 is given in table 8.4. The procurement
by the NAFED was the highest and SFAC was the lowest.
Table 8.4: Procurement of Kharif Pulses During 2016-17

(Quantity in MTs)
Pulses FCI NAFED SFAC Total
Moong 64737 128886 26225 219848
Urad 18235 59602 10746 88582
Tur 175299 919667 71079 1166045
Total 258271 1108155 108049 1474475
Source: FCI
The marketable surplus ratio of pigeon pea (arhar) was slowly increasing in Karnataka
whereas the same was either stagnant of declining in states like Madhya Pradesh,
Maharashtra, Odisha and Uttar Pradesh (see figure 8.1). The same was the case with
chickpea (gram) except Bihar. In Bihar though there was a decline in marketable surplus
ration in the year 2010-11, the marketable surplus ratio showed an increase in the
remaining years (see figure 8.2).
chickpea (gram) except Bihar. In Bihar though there was a decline in marketable surplus
ration in the year 2010-11, the marketable surplus ratio showed an increase in the remaining
years (see figure 8.2).
Figure8.1:
Figure 8.1: Marketable
Marketable Surplus
Surplus RatioRatio – Tur (Arhar)
– Tur (Arhar)
Marketable Surplus Ratio: Tur (Arhar)

120
100
80
MSR
60
40
20
0
Madhya
Karnataka Maharashtra Odisha Uttar Pradesh All-India
Pradesh
2010-11 87.15 78.49 69.48 65.86 65.4 73.82
2011-12 89.16 89.34 72.72 61.37 95.1 81.45
2012-13 96.34 94.07 83.3 74.58 67.24 84.33
2013-14 97.81 93.43 89.13 73.85 53.54 86.99
2014-15 97.4 93.36 85.16 54.37 84.82 88.21
Source:
Source: Directorate
Directorate of Economics
of Economics & DAC&FW
& Statistics, Statistics,
DAC&FW
Figure8.2:
Figure 8.2: Marketable
Marketable Surplus
Surplus RatioRatio – Gram
– Gram
102
Marketable Surplus Ratio: Gram
100
90
80
70
60
MSR
50
40
30
20
10
0
Bihar Madhya Pradesh Rajasthan Uttar Pradesh All-India
2010-11 77.27 92.92 86.46 56.83 86.68
2011-12 56.93 88.75 88.62 66.38 85.25
2012-13 68.06 89.04 80.23 61.91 83.67
2013-14 77.97 90.3 91.23 80.59 89.58
2014-15 80.42 93.31 94.14 67.42 91.1

Source: Directorate of Economics & Statistics, DAC&FW
Source: Directorate of Economics & Statistics, DAC&FW
E-NAM
E-NAM
The e-NAM or National Agriculture Market Electronic Trading (e-NAM) platform was
launched by the Ministry of Agriculture, Government of India on 14th April, 2016. The
The e-NAM or National Agriculture Market Electronic Trading (e-NAM) platform was
e-NAM provides a single window platform, both at state-level and national-level for
th
launched by the
information Ministry the
regarding of Agriculture, Government
prices, quality, variety,ofetc.,
Indiatoonall14the April, 2016.traders
farmers, The e- and
NAM stakeholders.
other provides a single window platform, both at state-level and national-level for
information regarding the prices, quality, variety, etc., to all the farmers, traders and other
stakeholders.
The e-NAM is a brainchild of R. Ramaseshan, a former Indian Administrative Services
officer from Karnataka. Ramaseshan after becoming the Chief Executive Officer of
National Commodity and Derivatives Exchange (NCDEX) proposed the idea of electronic
market which actually began at the Agricultural Produce Marketing Committee (APMC)
in Kalaburagi, Karnataka back in December 2011. The model initiated in Kalaburagi was
called the Rashtriya electronic Market Scheme (ReMS).
SFAC is the agency responsible for the implementation of e-NAM across the country. This
shift from an actual physical market to that of an online one serves a number of benefits,
such as real time price discovery, transparent online trading, reduced transaction cost for
buyers, better accessibility to the markets, efficient supply chain, etc. The provision of
electronic market addresses a number of problems, some of which are – fragmentation
of the State into multiple market areas, multiple levy of mandi fees, licensing barriers
which lead to conditions of monopoly, poor quality of infrastructure and lower use of
technology.
The facility has enabled farmers to opt to trade either by themselves through their mobile
phones or through commission agents. Currently, the e-NAM is linked with 585 APMC in
16 states and two Union Territories.
The states will be eligible for support under the e-NAM scheme only if, they have a single
valid license across the state, a single point levy of market fee and a provision for electronic
auction as a mode for price discovery. The respective states are required to administer
agriculture marketing as per their regulations. Each state is divided into several market
areas and each separate area is administered by a separate APMC.
The government through e-NAM has found a middle ground for the stakeholders, i.e.,
the farmers, traders, buyers, exporters etc. Due to e-NAM, the farmers are now not
dependent on the middlemen for the selling of their produce, while traders have received
a greater access to the national market. Electronic market would also benefit the buyers
as the intermediation costs would be reduced. This would further eliminate information
asymmetry and regulate traders and commission agents in a better way.
The initial target for the coverage of e-NAM was 200 APMCs and later on the target was
expanded to 585 APMCs by March 2018. The focus areas of the budget 2017-18 were
farmers, rural employment and infrastructure. According to the budget, assistance of up
to 75 lakh rupees would be provided to every e-NAM for the establishment of cleaning,
grading and packaging facilities.
Further, in budget 2018-19, the Ministry of Finance announced the creation of a 2,000
crore rupees agriculture market infrastructure fund and proposed the strengthening of
electronic national agriculture market. The Ministry also announced the development
and upgradation of existing 22,000 rural haats into Gramin Agricultural Markets (GrAMs),
which would benefit more than 86 percent small and marginal farmers. The GrAMs would
be electronically linked to e-NAM and exempted from the regulations of APMCs.
Currently, 90 commodities are traded on e-NAM.
Figure: 8.3: e-NAM Working Model
Source: http://sfacindia.com/images/NAM-Working-Model
NAM is not a parallel marketing structure but a mechanism to create a unified network
of physical mandis, which could be accessed online. NAM builds on the strength of
local markets and allows them to offer their produce at a national level. Further, e-NAM
increases the choice of the farmers for selling their produce. The scheme is pro-farmer
in a number of ways, such as, the farmers through e-NAM would get better prices as they
would now have an option to sell it wherever he wishes, the farmers would get the whole
payment on time, etc.
8.4 Conclusion
The present chapter discussed the evolution of agricultural and food security policies
in India along with the effectiveness of MSP and procurement. The data and studies
at the national level broadly indicated that MSP is an important policy instrument in
encouraging farmers and to stabilize market prices. However the percentage of farmers
who were aware of MSP was less especially for pulses. This was also reflected in the lack
of knowledge about procurement agencies. Interestingly the percentage of households
who sold their products to procurement agencies were even lower than the percentage of
households who had information about procurement agencies. In chapter 5 our analysis
of sample households from three states selected for analysis also showed poor awareness
of MSP. The farmers who avail MSP even with a positive information about MSP was
also lower. The next chapter will therefore make an analysis of factors influencing the
information access to MSP along with the factors influencing the utilization of MSP.
therefore make an analysis of factors influencing the information access to MSP along with
Appendix
the factors influencing the utilization of MSP.
Figure A8.1: Wholesale Price vis-à-vis MSP - Tur (Arhar)
Appendix
Wholesale Price vis-à-vis
Appendix MSP :Tur(Arhar)
FigureA8.1:
Figure A8.1: Wholesale
Wholesale Price
Price vis-à-vis
vis-à-vis MSP - MSP - Tur (Arhar)
Tur (Arhar)
16000
14000
12000 Wholesale Price vis-à-vis MSP :Tur(Arhar)
Rs./QuintalRs./Quintal
10000
16000
8000
14000
Wholesale Price
6000
12000
4000
10000 MSP
2000
8000
0 Wholesale Price
6000
2009 Q1
2009 Q3
2010 Q1
2010 Q3
2011 Q1
2011 Q3
2012 Q1
2012 Q3
2013 Q1
2013 Q3
2014 Q1
2014 Q3
2015 Q1
2015 Q3
2016 Q1
2016 Q3
2017 Q1
2017 Q3
2018 Q1
4000 MSP
2000
0
2009 Q1
2009 Q3
2010 Q1
2010 Q3
2011 Q1
2011 Q3
2012 Q1
2012 Q3
2013 Q1
2013 Q3
2014 Q1
2014 Q3
2015 Q1
2015 Q3
2016 Q1
2016 Q3
2017 Q1
2017 Q3
2018 Q1
Source: Department of Consumer Affairs (Price Monitoring Cell) and Directorate of Economics &
Statistics, DAC&FW
Source:
Source:Department
Departmentof Consumer Affairs Affairs
of Consumer (Price Monitoring Cell) and Directorate
(Price Monitoring Cell) andof Economics & Statistics,
Directorate DAC&FW&
of Economics
Statistics, DAC&FW
Figure
FigureA8.2:
A8.2:Wholesale Price
Wholesale vis-à-vis
Price MSP - MSP
vis-à-vis Urad - Urad
Wholesale Price vis-à-vis MSP :Urad

Figure A8.2: Wholesale Price vis-à-vis MSP - Urad
16000
14000
12000 Wholesale Price vis-à-vis MSP :Urad
Rs./QuintalRs./Quintal
10000
16000
8000
14000
Wholesale Price
6000
12000
4000
10000 MSP
2000
8000
0 Wholesale Price
6000
2009 Q1
2009 Q3
2010 Q1
2010 Q3
2011 Q1
2011 Q3
2012 Q1
2012 Q3
2013 Q1
2013 Q3
2014 Q1
2014 Q3
2015 Q1
2015 Q3
2016 Q1
2016 Q3
2017 Q1
2017 Q3
2018 Q1
4000 MSP
2000
0
2009 Q1
2009 Q3
2010 Q1
2010 Q3
2011 Q1
2011 Q3
2012 Q1
2012 Q3
2013 Q1
2013 Q3
2014 Q1
2014 Q3
2015 Q1
2015 Q3
2016 Q1
2016 Q3
2017 Q1
2017 Q3
2018 Q1
Source:
Source:Department
Departmentof Consumer Affairs Affairs
(Price Monitoring Cell) andof Economics & Statistics,
Directorate DAC&FW&
of Economics
Statistics, DAC&FW
Statistics, DAC&FW
106
106
Figure A8.3: Wholesale Price vis-à-vis MSP - Moong
Wholesale Price vis-à-vis MSP :Moong

Figure
FigureA8.3:
A8.3:Wholesale Price
Price MSP -MSP
vis-à-vis Moong
- Moong
12000
10000
Wholesale Price vis-à-vis MSP :Moong
8000
Rs./Quintal Rs./Quintal
12000
6000
10000 Wholesale Price
4000
8000 MSP
2000
6000
0 Wholesale Price
4000
2009 Q1
2009 Q3
2010 Q1
2010 Q3
2011 Q1
2011 Q3
2012 Q1
2012 Q3
2013 Q1
2013 Q3
2014 Q1
2014 Q3
2015 Q1
2015 Q3
2016 Q1
2016 Q3
2017 Q1
2017 Q3
2018 Q1
MSP
2000
0
2009 Q1
2009 Q3
2010 Q1
2010 Q3
2011 Q1
2011 Q3
2012 Q1
2012 Q3
2013 Q1
2013 Q3
2014 Q1
2014 Q3
2015 Q1
2015 Q3
2016 Q1
2016 Q3
2017 Q1
2017 Q3
2018 Q1
Statistics, DAC&FW
Source: Department of Consumer Affairs (Price Monitoring Cell) and Directorate of Economics & Statistics, DAC&FW
Statistics,
Figure DAC&FW
FigureA8.4: Wholesale
A8.4: Price
Price MSP -MSP
vis-à-vis Gram - Gram
Wholesale Price vis-à-vis MSP: Gram

Figure A8.4: Wholesale Price vis-à-vis MSP - Gram
12000
10000
Wholesale Price vis-à-vis MSP: Gram
8000
12000
Rs/Quintal Rs/Quintal
6000
10000
Wholesale Price
4000
8000 MSP
2000
6000
Wholesale Price
0
4000 MSP
2009 Q1
2009 Q3
2010 Q1
2010 Q3
2011 Q1
2011 Q3
2012 Q1
2012 Q3
2013 Q1
2013 Q3
2014 Q1
2014 Q3
2015 Q1
2015 Q3
2016 Q1
2016 Q3
2017 Q1
2017 Q3
2018 Q1
2000
0
2009 Q1
2009 Q3
2010 Q1
2010 Q3
2011 Q1
2011 Q3
2012 Q1
2012 Q3
2013 Q1
2013 Q3
2014 Q1
2014 Q3
2015 Q1
2015 Q3
2016 Q1
2016 Q3
2017 Q1
2017 Q3
2018 Q1
Source:
Source:Department of Consumer
Department AffairsAffairs
(Price Monitoring Cell) andof Economics
Directorate& Statistics,
of EconomicsDAC&FW
&
Statistics, DAC&FW
Statistics, DAC&FW
107
107
Figure A8.5: Wholesale Price vis-à-vis MSP - Masoor
Wholesale Price vis-à-vis MSP: Masoor

Figure
Figure A8.5:
A8.5:
12000 Wholesale
Wholesale Price
Price vis-à-vis
vis-à-vis MSP -MSP - Masoor
Masoor
10000
Wholesale Price vis-à-vis MSP: Masoor
8000
12000
Rs/Quintal Rs/Quintal
6000
10000 Wholesale Price
4000
8000 MSP
2000
6000
Wholesale Price
0
4000 MSP
2009 Q1
2009 Q3
2010 Q1
2010 Q3
2011 Q1
2011 Q3
2012 Q1
2012 Q3
2013 Q1
2013 Q3
2014 Q1
2014 Q3
2015 Q1
2015 Q3
2016 Q1
2016 Q3
2017 Q1
2017 Q3
2018 Q1
2000
0
2009 Q1
2009 Q3
2010 Q1
2010 Q3
2011 Q1
2011 Q3
2012 Q1
2012 Q3
2013 Q1
2013 Q3
2014 Q1
2014 Q3
2015 Q1
2015 Q3
2016 Q1
2016 Q3
2017 Q1
2017 Q3
2018 Q1
Statistics, DAC&FW
Source:
Source:Department of Consumer
Department AffairsAffairs
(Price Monitoring Cell) andof Economics
Directorate& of
Statistics,
EconomicsDAC&FW
&
Statistics,
FigureA8.6: DAC&FW
A8.6: Wholesale Prices all Zones - Tur (Arhar)
Figure Wholesale Prices all Zones - Tur (Arhar)
Wholesale Prices All Zones: Tur (Arhar)

Figure A8.6: Wholesale Prices all Zones - Tur (Arhar)
18000
16000
14000 Wholesale Prices All Zones: Tur (Arhar)
12000
18000 SOUTH ZONE
Rs./Quintal Rs./Quintal
10000
16000 WEST ZONE
8000
14000
EAST ZONE
6000
12000
SOUTH ZONE
WEST ZONE
4000
10000
2000 WEST ZONE
NORTH ZONE
8000
0 EAST ZONE
6000
2009 Q1
2009 Q3
2010 Q1
2010 Q3
2011 Q1
2011 Q3
2012 Q1
2012 Q3
2013 Q1
2013 Q3
2014 Q1
2014 Q3
2015 Q1
2015 Q3
2016 Q1
2016 Q3
2017 Q1
2017 Q3
2018 Q1
4000 WEST ZONE

2000 NORTH ZONE
0
Source: Department of Consumer Affairs (Price Monitoring Cell)
2009 Q1
2009 Q3
2010 Q1
2010 Q3
2011 Q1
2011 Q3
2012 Q1
2012 Q3
2013 Q1
2013 Q3
2014 Q1
2014 Q3
2015 Q1
2015 Q3
2016 Q1
2016 Q3
2017 Q1
2017 Q3
2018 Q1
108
108
FigureA8.7:
Figure A8.7: Wholesale
Wholesale Prices
Prices all Zones
all Zones – Gram– Gram
Wholesale Prices All Zones: Gram

14000
12000
10000
NORTH ZONE
Rs./Quintal
8000
WEST ZONE
6000
SOUTH ZONE
4000
NORTH-EAST ZONE
2000
EAST ZONE
0
2009 Q1
2009 Q3
2010 Q1
2010 Q3
2011 Q1
2011 Q3
2012 Q1
2012 Q3
2013 Q1
2013 Q3
2014 Q1
2014 Q3
2015 Q1
2015 Q3
2016 Q1
2016 Q3
2017 Q1
2017 Q3
2018 Q1
Source:
Source:Department
Departmentof Consumer AffairsAffairs
of Consumer (Price Monitoring Cell)
(Price Monitoring Cell)
109
Chapter Information and
09 Utilisation of MSP: Major
Determinants
9.1 Introduction
The prices of agricultural commodities are inherently more volatile than nonagricultural
commodity prices. The major reasons are the inelastic nature of supply to prices. Lack
of market integration and information asymmetry also play a role. A very good harvest
in one year will result in sharp fall in the prices of that commodity and farmers will be
discouraged from continuing production due to heavy loss. This then causes paucity of
supply next year and hence, major price increase for consumers. Somewhat similar to
this we experience in the case of pulses. A severe deficit in supply led to soaring of prices
in the year 2015-16. However, an increased price and other government interventions
again encouraged the production of surplus. Even with an increase in production, the
import dependency to meet the excess demand is growing. Additionally, an increase
in production is still lagging behind the demand. To counter this, MSP is fixed by the
government, each year. MSP is a tool which gives guarantee to the farmers, prior to the
sowing season, that a fair amount of price is fixed to their upcoming crop to encourage
higher investment and production. The MSP is in the nature of an assured market at a
minimum guaranteed price offered by the government. However, our analysis of the
profile of sample households in chapter 5 and the discussion in chapter 9 showed that
percentage of farmers who have information about pulses MSP and those who are availing
MSP were very less. The farmers who sold crop to procurement agencies even when they
had information about MSP and procurement agencies were also less. Therefore, the
present chapter will make an analysis of factors influencing the information access to
MSP and utilisation of MSP.
9.2 Conceptual Framework

The farmer’s decision on whether to avail MSP or not is based on utility maximisation
(Rahm and Huffman, 1984; Shiferaw et.al., 2015). The ith farmer will go for MSP if the
utility derived from the same (U1i) is greater than not availing it (U0i), that is, U1i > U0i. By
denoting Ad for availing decision we can write:
𝑃𝑃𝑃𝑃𝑖𝑖𝑖𝑖 = 𝑃𝑃𝑃𝑃𝑟𝑟𝑟𝑟 (𝐴𝐴𝐴𝐴𝑑𝑑𝑑𝑑In=the
1) first
= 𝑃𝑃𝑃𝑃𝑟𝑟𝑟𝑟 scenario (A)d=1) the utility from MSP is higher whereas in
(𝑈𝑈𝑈𝑈1𝑖𝑖𝑖𝑖 > 𝑈𝑈𝑈𝑈0𝑖𝑖𝑖𝑖
(Ad=0) the utility is smaller than or equal to not availing MSP. The proba
= 𝐹𝐹𝐹𝐹𝑖𝑖𝑖𝑖 (𝑋𝑋𝑋𝑋𝑖𝑖𝑖𝑖 𝛽𝛽𝛽𝛽) (2)
will avail MSP (Ad=1) depends on a set of explanatory variables.
𝑃𝑃𝑃𝑃𝑖𝑖𝑖𝑖 = 1𝑃𝑃𝑃𝑃𝑟𝑟𝑟𝑟𝑖𝑖𝑖𝑖(𝐴𝐴𝐴𝐴
𝑖𝑖𝑖𝑖 𝑈𝑈𝑈𝑈𝑑𝑑𝑑𝑑0𝑖𝑖𝑖𝑖= <1)𝑈𝑈𝑈𝑈= 𝑃𝑃𝑃𝑃𝑟𝑟𝑟𝑟 (𝑈𝑈𝑈𝑈1𝑖𝑖𝑖𝑖 > 𝑈𝑈𝑈𝑈0𝑖𝑖𝑖𝑖 )
1𝑖𝑖𝑖𝑖
𝐴𝐴𝐴𝐴
Where X 𝑑𝑑𝑑𝑑is the = �
0 𝑖𝑖𝑖𝑖n𝑖𝑖𝑖𝑖 𝑈𝑈𝑈𝑈
x 1𝑖𝑖𝑖𝑖k ≤matrix of the explanatory variables and β is the(1)k x 1
𝑈𝑈𝑈𝑈0𝑖𝑖𝑖𝑖 (1)
= 𝐹𝐹𝐹𝐹𝑖𝑖𝑖𝑖 (𝑋𝑋𝑋𝑋𝑖𝑖𝑖𝑖 𝛽𝛽𝛽𝛽) (2)
parameters
In the first scenario (Ad=1) the utility to from be estimated, MSP is Pr (.) iswhereas
higher the probabilityin the function,
second μi is the random error
scenario
In the first scenario (Ad=1) the utility from MSP is higher whereas in th
Fi (Xthan
(Ad=0) the utility is smaller i β) isor theequal cumulative to not distribution availing MSP. function for μi evaluated
The probability Xi β. The probab
thatatthe
(Ad=0) the utility is smaller than or equal to not availing MSP. The probabil
farmer will avail MSP (Afarmer
=1) depends
will avail on MSP a set of is aexplanatory
function of the variables.
vector of explanatory variables and of the
d
will Where avail MSP X is (A thed=1) n xdepends k matrix on ofa set theof explanatory variables and β is
explanatory variables.
parameters and error term.
Pi = Pr (Ad =parameters 1)=P (U to > be ) =F (X β)Pr (.) is the probability function,
U estimated, (2) μi is the ran
𝑃𝑃𝑃𝑃𝑖𝑖𝑖𝑖 = 𝑃𝑃𝑃𝑃𝑟𝑟𝑟𝑟 (𝐴𝐴𝐴𝐴r 𝑑𝑑𝑑𝑑 =1i 1) =0i 𝑃𝑃𝑃𝑃𝑟𝑟𝑟𝑟 (𝑈𝑈𝑈𝑈i1𝑖𝑖𝑖𝑖 >i 𝑈𝑈𝑈𝑈0𝑖𝑖𝑖𝑖 )
As discussed Fi (Xi β) is the the expected
cumulative distribution μi evaluated at Xi β. T
function forhowever,
Where X is the n x k matrix of the earlier, explanatory variables utility andofβthe is MSP
the kisx not,
1 vector of the only one
parameters to be estimated, = is
Pr (.)
determines 𝐹𝐹𝐹𝐹farmer’s
farmer (𝑋𝑋𝑋𝑋𝑖𝑖𝑖𝑖 𝛽𝛽𝛽𝛽)
𝑖𝑖𝑖𝑖 the willdecision
probability avail MSP function, is a function
to avail μi is the
MSP. ofrandom
This the vector of explanatory
error
is especially term,
true (2)
for smallvariables
holder
and Fi (Xi β) is the cumulative distribution
developingparameters countries and function where for
errorthey term.
μ evaluated
i face information
at X i
β. The probability
constraints. The information,
that a farmer will avail MSP is a function of the vector of explanatory variables and of the
required for a farmer to make the decision can be given as:
unknown parameters and error Where term. As discussed X is theearlier, n x k the expected
matrix of the utility of the MSP
explanatory is not, however,
variables and β is thethe
determines
parameters to farmer’s decision
be estimated, to is
Pr (.) avail
the MSP. This isfunction,
probability especially true
μi is thefor sm
rando
As discussed earlier, the expected utility of the MSP is not, however, the only one factor that
developing the countries where they face information constraints.
at XiThe in
determines farmer’s decision to 1 𝑖𝑖𝑖𝑖F𝑖𝑖𝑖𝑖i 𝐼𝐼𝐼𝐼(X
avail β)0 is This
i MSP.
𝑖𝑖𝑖𝑖 >
cumulative distribution
is especially function
true for small for μfarmers
holder i evaluated β. The
𝐼𝐼𝐼𝐼𝑖𝑖𝑖𝑖 = � (3)
in developing countries where0they 𝑖𝑖𝑖𝑖 required
𝑖𝑖𝑖𝑖farmer 𝐼𝐼𝐼𝐼𝑖𝑖𝑖𝑖 face
≤ will for a farmer
0 information
avail istoamake
MSP constraints.the The
function decision
of the can be
vector given as: variables an
of explanatory
information, i, that
is required for a farmer to makeparameters
the decision
andcan beterm.
error given as:
Now theAsfarmer discussed

1 𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 𝐼𝐼𝐼𝐼𝑖𝑖𝑖𝑖earlier,
𝐼𝐼𝐼𝐼𝑖𝑖𝑖𝑖 = � is aware
> 0of the MSPexpected
and theutility of the MSP
information is not, however,
is received. Passing the o
(3)the fi
0 𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 𝐼𝐼𝐼𝐼𝑖𝑖𝑖𝑖 ≤ 0 (3)
places adetermines
farmer in the farmer’s class decision to avail
of farmers who MSP. This is especially
are “potential users” duetrue
to for
the small
fact
Now the farmer is aware of MSP and the information is received. Passing the first hurdle
developing
“effective information”. countries This iswhere they to
expected face information
help a farmer inconstraints.
evaluating The infor
the bene
places a farmer in the class of farmers who are “potential users” due to the fact they have
requiredthe
MSP.isWhether forMSP a farmer has to make
been the decision
availed or not bycan
the be given as: can be given as:
households
“effective information”. This expected
Now the to help farmer a farmer
is aware in of
evaluating
MSP andthe thebenefits of theis received. Pas
information
MSP. Whether the MSP has been availed or not by the households can be given as:
places a farmer in the class of farmers who are “potential users” due t
“effective information”.
11,𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖if𝐼𝐼𝐼𝐼𝑖𝑖𝑖𝑖MSP
> 0 is availed This is expected to help a farmer in evaluating
𝐼𝐼𝐼𝐼 = �
=� 0 𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖
𝐴𝐴𝐴𝐴 = 𝐴𝐴𝐴𝐴𝑖𝑖𝑖𝑖 𝐴𝐴𝐴𝐴𝑑𝑑𝑑𝑑𝑖𝑖𝑖𝑖 MSP. (4) (3)
0, ifWhether 𝐼𝐼𝐼𝐼𝑖𝑖𝑖𝑖 ≤ 0
MSP the MSP
is not
has been
availed availed or not by the(4)
households can be
The decision to avail MSP depends on their household and farm-level characteristics
along with other factors.
Now the farmer 1, is aware
if MSPof MSP and the information is received. Passin
is availed
𝐴𝐴𝐴𝐴 = 𝐴𝐴𝐴𝐴𝑖𝑖𝑖𝑖 𝐴𝐴𝐴𝐴𝑑𝑑𝑑𝑑 =� (4)
9.3 Model Specification places a farmer0,inifthe MSP is not availed111
class of farmers who are “potential users” due to
The farmer’s demand for MSP can be written
“effective as below: This is expected to help a farmer in evaluating t
information”.
MSP. Whether the MSP has been availed or not by the households can be g
yi* = αxi’ + ui (5)
111
Where is a vector of variables that determine the demand function, is a parameter vector,
u is an error term with mean 0 and variance σu. Similarly, the latent variable underlying a
1, if MSP is availed
𝐴𝐴𝐴𝐴 =be
farmer’s access to information can 𝐴𝐴𝐴𝐴𝑑𝑑𝑑𝑑 =�
𝐴𝐴𝐴𝐴𝑖𝑖𝑖𝑖modelled (4)
0, ifas below:
MSP is not availed
Ii* = βzi’ + ϵi (Access to information) (6)
111
In the above equations, zi’ is the vector of variables that affect the availability of information.
And β is the parameters to be estimated; β is the error term with mean 0 and variance
1. The observed demand for MSP by a farmer (Yi) is characterised by the interaction of
models (5) and (6).
The joint probability for adoption is estimated using conditional (recursive) mixed process
estimator (CMP) developed by Roodman (2009, 2011). CMP estimates multi-equation,
recursive mixed process models. “Mixed process” means that different equations can have
different kinds of dependent variables. CMP can only fit “recursive” models with clearly
defined stages. To illustrate, A and B can be determinants of C; and C, a determinant of
D—but D cannot be a determinant of A, B, or C (Roodman, 2011). Equations are estimated
using probit models.
9.4 Description of Dependent and Explanatory Variables

The dependent variables in our analysis are access to information and utilization of
MSP. In order to understand the utilization of MSP the farmers were asked whether they
are availing MSP or not. Though there have not been any study analyzing the factors
influencing the farmers access to MSP information and decision to avail MSP, the studies
in the context of farmer’s decision making in general is useful to understand the important
determinants of farmer’s decision. Therefore, the present study make use of such studies
to draw the list of explanatory variables. Several studies have included household and farm
characteristics as important factors influencing the farm level decision by farmers (Feder
et.al., 1985; Uaiene, 2011; Teklewold et.al., 2013; Ogada et.al., 2014; Manda et.al., 2015).
As far as the age factor is concerned, one set of studies postulate a positive relationship
(Meshram et.al, 2012; Kassie et.al., 2013) while the other a negative relationship (Manda
et.al., 2015). Those who postulate a positive relationship argue that older farmers are more
experienced and might have accumulated greater physical and social capital (Kassie et.al.,
2013). Nonetheless, there is also belief that older farmers are less amenable to change
and, therefore, unwilling to change (Adesina and Zinnah, 1993).
Certain fixed social bias (that is, gender of household head) is also expected to have an
impact (Langyintuo and Mungoma, 2008). There is a view that women farmers face greater
constraints in terms of access to resources and time and hence can be less enthusiastic
(Pender and Gebremedhin, 2008). The size of the household is used as a proxy to capture
labour endowment (Pender and Gebremedhin, 2008). As far as the importance of total
farm size is concerned, it is quite possible that large farmers will have greater access to
information and therefore higher possibility to avail MSP.
Education of the household is also expected to have a positive impact in receiving

information about MSP and also in availing MSP. Access to off-farm activities and income
in general are expected to have a positive impact. Membership in farmer organisation is
another important factor that can influence farmers’ accessibility to information. Market
access also has a huge bearing on transaction cost in accessing information (Kassie et.al.,
2015). In line with Kassie et.al., (2015), we consider the distance from main market as a
proxy for market access. The farmers were also asked whether they sell their product
in APMC or not assuming it to have an implication to access information and avail MSP.
Access to extension services also play a significant role. The present study has included
the variable ‘crop failure’ that the farmers experienced in the last five years as a proxy
to capture the impact of production risk-related factors in receiving information and in
availing MSP. The description of variables is given in table 9.1. The descriptive statistics of
the model is given in table 9.2.
Table 9.1: Variable Description

Variable Definition
Age of the HOH Age of the Head of the Household
Gender of the head of the household, dummy variable = 1 if the
Gender of HoH
household has a male head of the household.
Education Number of years of education of the Head of the Household
Household size Number of the family members in the household including children.
Total size of owned and rented land holdings cultivated by household
Farm Size
in hectares.
Membership of any of the family member in the input supply
Membership in the input supply
organisations, dummy variable = 1 if any of the family member has
organisations
membership in farmer organisations, = 0 otherwise
First principal component of three ICT dummy Radio (= 1 if any of the
household member has a radio, = 0 otherwise), TV (= 1 if any of the
ICT (Component 1)
household member has a TV, = 0 otherwise) and Mobile (= 1 if any of the
household member has a mobile phone, = 0 otherwise).
Distance from main market Distance to the nearest main market in kilometres
Access to off farm activities = 1 if the household had access to off farm activities, = 0 otherwise.
= 1 if the household had awareness of KCC (Kisan Call Centre), = 0
Awareness of KCC
otherwise.
Contact with government = 1 if the household had contact with government extension agents, =
extension agents 0 otherwise.
= 1 if the household had received training for farming from government
Training received for farming
departments or NGO’s, = 0 otherwise.
Awareness of government
= 1 if the household had awareness of government schemes promoting
schemes promoting pulses
pulses production, = 0 otherwise.
production
Chick pea cultivated = 1 if the household cultivates chick pea, = 0 otherwise
Pigeon pea cultivated = 1 if the household cultivates pigeon pea, = 0 otherwise
Other crops cultivated Total size of land under cultivation for crops besides pulses
Place of selling produce = 1 if the household sold its produce in APMC, = 0 otherwise.
= 1 if the household has experienced any type of crop failure in the last
Crop failure
5 years, = 0 otherwise.
Maharashtra State dummy = 1 for those households residing in Maharashtra, = 0 otherwise.
Madhya Pradesh State dummy = 1 for those households residing in Madhya Pradesh, = 0 otherwise.
Source: Survey data
Table 9.2: Descriptive Statistics for Variables used in the Model
Variables Adopters
Age of the HOH 48.7 (13.13)
Gender of HoH 0.98 (0.15)
Education 6.83 (5.52)
Household size 5.64 (3.18)
Farm Size 3.33 (0.98)
Membership in the input supply organisations 0.22 (0.42)
ICT (Component 1) 0 (1.48)
Distance from main market 14.21 (7.11)
Access to off farm activities 0.14 (0.35)
Awareness of KCC 0.29 (0.46)
Contact with government extension agents 0.43 (0.5)
Training received for farming 0.19 (0.39)
Awareness of government schemes promoting pulses production 0.14 (0.35)
Chick pea cultivated 0.55 (0.5)
Pigeon pea cultivated 0.84 (0.36)
Other crops cultivated 5.44 (7.52)
Place of selling produce 0.42 (0.49)
Crop failure 1.53 (0.97)
Maharashtra State dummy 0.35 (0.48)
Madhya Pradesh State dummy 0.31 (0.46)
Number of observations 572
Note: Standard deviation is given in parentheses.
Source: Survey data
Table 9.3: Results for MSP

A: Information access to MSP A: Information access to MSP
Karnataka 0 Number of Family Members -0.0157
(.) (0.0278)
Maharashtra 1.004 Years of Education of HOH 0.106***
(1.085) (0.0286)
Madhya Pradesh 3.119*** Access to off farm activity (Yes 1, No 0) -0.00172
(0.636) (0.311)
Scores for component 1 -0.106 Annual Family Income from farm (in
-0.00216
(0.319) Lakhs)
Other Crops Acres -0.00992 (0.0166)

(0.0227) Contact with government agents(yes
-0.165
1, No 0)
Age of HOH -0.00831
(0.218)
(0.00923)
Member of input supply cooperation
Gender of HOH (Male 1, Female 0) 0.694 0.207
(Yes 1, No 0)
(1.165) (0.288)
A: Information access to MSP B. Utilisation of MSP
Walking distance to Markets (Kms) -0.0449*** Place where farmer sells produce=0 0
(0.0116) (.)
KCC Awareness (Yes 1, No 0) 0.180 Place where farmer sells produce=1 0.0876*
(0.372) (0.0367)
Chickpea Farmer -0.365 Annual Family Income from farm (in
0.00313
(0.301) Lakhs)
Pigeonpea Farmer -0.756* (0.00460)
(0.367) Contact with government agents -0.0883*
Farm Size 0.236 (0.0408)
(0.148) Member of input supply cooperation 0.0597
Training Received (Yes 1 No 0) 1.292*** (0.0349)
(0.229) Walking distance to Markets (Kms) -0.0129***
Constant -1.702 (0.00299)
(1.429) Awareness of government schemes

0.259***
promoting pulses
B. Utilisation of MSP
(0.0506)
Karnataka
Number of crop failures in last 5 years 0.0315
(.)
(0.0232)
Maharashtra 0.267***
Chickpea Farmer -0.0814*
(0.0582)
(0.0331)
Madhya Pradesh 0.0542
Pigeon pea Farmer -0.132**
(0.0709)
(0.0481)
Scores for component 1 -0.0174
Training Received 0.213***
(0.0152)
(0.0505)
Other Crops Acres -0.00557*
Farm Size 0.0617***
(0.00218)
(0.0182)
Age of HOH -0.00274**
Constant 0.156
(0.00106)
(0.108)
Gender of HOH 0.0439
lnsig_2
(0.0335)
Constant -1.082***
Number of Family Members 0.00127
(0.0341)
(0.00453)
atanhrho_12
Years of Education of HOH 0.0143***
Constant 0.498***
(0.00362)
(0.111)
Access to off farm activity 0.0261
Observations 572
(0.0460)
Notes: ***, **, * denote statistical significance at 1%, 5% and 10% respectively. Standard errors are given in the parenthesis

The results from the conditional (recursive) mixed process equation model is given in
table 9.1. The results from the analysis showed that Madhya Pradesh had greater access
to information about MSP as compared to other states. This was also seen in the analysis
of socio economic profile of the sample households in chapter 5. However, the utilization
of MSP was more in Maharashtra. Education and training received by farmers from
government departments of NGOs had a positive and significant impact in accessing the
information regarding MSP. Whereas market access and distance to market reduced the
access to information. The variable for pigeon pea farmer also came out to be significant
and negative. This indicates that pigeon pea farmers had less probability to receive
information. Information access was less in Karnataka (refer chapter 5) and Karnataka
had greater share of pigeon pea farmers in our sample.
As far as the utilization of MSP is concerned those who are cultivating other crops or more
diversified farmers availed MSP less. This could be the reason for statistically significant
and negative relationship between utilisation of MSP and cultivation of other crops. This
can also be the reason why large farmers in Madhya Pradesh despite having greater access
to information about MSP is not availing MSP. This can also be the reason why the dummy
variable for only Maharashtra came out to be significant in the utilization model. Age of
the farmer had a significant and negative relationship with utilisation of MSP. Similarly,
education of the farmer increased the chances of availing MSP as the relationship between
education variable and utilisation of MSP was positive and statistically significant.
Similarly, those farmers who sell their crop in APMC also had a greater probability to
avail MSP. Those farmers who receiving training had greater probability in receiving
information as well as in availing MSP. The risk factor increased the probability to avail
MSP. This is an interesting result. The variable number of crop failure in last five years had
a positive and statistically significant relationship with availing MSP. The market access
came out to be as a significant factor in availing MSP. Those who have less market access
had lower probability to avail MSP. The variable distance to market came out to be negative
and statistically significant in our analysis. Interestingly, the probability of chickpea and
pigeon pea farmers in availing MSP was also negative and statistically significant.
9.6 Conclusion
The present chapter analysed the factors influencing the access to information regarding
MSP and the decision to avail MSP. The regression equation was estimated using the CMP
command which uses the mixed process estimator. The results showed that Maharashtra
farmers were more enthusiastic in availing MSP despite of the fact that the information
regarding MSP was highest among the farmers from Madhya Pradesh. However farmers
who had more diversified crop cultivation were not very enthusiastic in availing MSP. The
majority of the farmers in Madhya Pradesh in our sample were large farmers and most
probably they are more diversified. Market access came out to be as an important factor
in information and in availing MSP. The risk faced by farmers also increased the chances
to avail MSP and this points out how important MSP is in mitigating the negative effects
of risk.
Chapter
Supply Response of
10 Major Pulses3
10.1 Introduction
The literature on estimating supply response to prices has a long history in agricultural
economics (Nerlove 1956; Houck and Ryan 1972; Lee and Helmberger 1985). There are
various reasons for renewed interest in supply response analysis in the recent times
including an increased volatility of agricultural commodity prices that we experienced
since 2005 and its consequences on farm income and food security (Haile et.al., 2016).
The present analysis builds on the extensive agricultural economics literature on the
estimation of agricultural supply response. Supply response models calculates the
elasticities that measure the magnitude of desired supply response to expected prices
(Haile et.al., 2016). The empirical literature employs various supply response equations
based on different theoretical underpinnings.
Though there have been couple of theoretical and empirical approaches to analyse the
supply response in the literature, two major frameworks that have been widely used are
the Nerlovian expectations model and the supply function approach. The first approach
facilitates the analysis of both the speed and level of adjustment of actual acreage
and yield to desired levels. The second approach is derived from profit-maximising
framework. The supply function approach make use of profit, revenue or cost function in
the estimation. Since our interest lies mainly in the output response to prices and major
policy instruments, we make use of Nerlovian expectations model in our analysis.
The theoretical underpinnings of the supply response model assume that the producer’s
aim is to maximise the profit. Based on the firm’s implicit multi- production function, the
literature shows that the supply of the farm commodity is the function of both output and
input prices of that commodity as well as competing crops (Beckman and Wailes, 2005).
Therefore, production is directly related to prices with profit maximisation being the
3
With necessary permissions, this chapter draws heavily from the unpublished research undertaken by Jannet John, Anar
Bhatt and Poornima Varma (2019).
focus of every farmer (Ferris, 1995). Nonetheless, the literature points out that the supply
responsiveness to market prices are positive but low in the developing countries owing
to many infrastructural and technological related factors (Yu et.al., 2011). Therefore non-
price factors play a crucial role in the supply responsiveness of agricultural commodities
in developing countries. The non-price factors include irrigation, rainfall, technology
and market access. Additionally, supply response to price can vary under different policy
regimes. Previous literature claims that the current year decision to plant has some
correlation with the previous year’s area under cultivation (Beckman and Wailes, 2005).
The lag in the area adjustment in agricultural production is due to resource constraints
and therefore a dynamic estimation technique approach would be more appropriate to
recognise the lags in supply response (Yu et.al., 2011).
Generalised Method of Moments (GMM) developed by Arellano and Bond (1991) and
Blundell and Bond (1998) can be used for dynamic panel data estimation (Ullaah et.al.,
2018). The dynamic panel data techniques are employed when we have a reason to believe
that the cause and effect relationship of the underlying phenomenon is dynamic over
time. For example, while making current year’s acreage allocation decisions by a farmer,
previous years’ acreages under cultivation can also play a significant role. Dynamic panel
data estimation technique employs lagged values of dependant variables as an explanatory
variable to correct for this possible endogeneity issue. The GMM model which is employed
to estimate dynamic panel data provides consistent estimates in the presence of different
sources of endogeneity such as unobserved heterogeneity, simultaneity and dynamic
endogeneity (Ullaah et.al., 2018). As per the literature two years of lag is sufficient to
capture the endogenous relationship (Ullah et.al., 2018).
Therefore, supply is expected to be the function of input and output prices of own crop(s),
prices of competing crops, previous year’s area under cultivation, non-price factors such
as rainfall, trade and other policy interventions. We include trade variables to capture the
impact of trade on the net quantity available in the domestic market and its impact. As
policy variables we include minimum support prices and a dummy variable to capture the
impact of National Food Security Mission (NFSM). Assuming there are N regions observed
over T time periods, the area of crop k in region i in period t can be specified as;
Where y is the crop area, the superscript k refers to specific crop and i indicates the
specific state and subscript t indicates the time. TAit indicates the total area under
crops during the current year t for the state i. indicates the total lagged area under
crops for the state i. X is the vector of variables (i.e. prices and exogenous variables)
and βis are parameters to be estimated.
10.2 Data
The analysis is undertaken for four major pulses producing states - Madhya Pradesh,
Karnataka, Maharashtra and Uttar Pradesh. The data on cost of cultivation, prices and
MSP are obtained from the CACP website. The data on trade is extracted from wits (world
integrated trade solution) database managed by World Bank. The data on area under
cultivation and production are obtained from the CMIE states of India website for all the
states under study.
The GMM results of supply response functions for pigeon pea and chickpea are given
in table 10.3 and 10.4, assuming a two-year lag. The results showed that previous year’s
acreage allocation is significant in current years decision to allocate area under the crop.
In the case of pigeon pea last year and last year had a positive and significant impact
whereas in the case of chickpea only the last year had a positive and significant impact.
Interestingly, last to last year’s area under cultivation of Chickpea had a negative and
significant impact on this year’s cultivation of chickpea. Cost of cultivation of had a
negative and significant impact in the case of chickpea. The striking and expected results
are in the case of MSP. MSP had a positive and significant impact on area allocation of
both the crops. As expected, prices of competing crops had a negative and significant
impact on the area under cultivation of both the crops. Market prices of chickpea had a
positive impact on area under cultivation whereas in the case of pigeon pea market prices
were not significant. This is indicating the fact that supply of pigeon pea is more sensitive
to other factors such as MSP. The lag of net volume of trade calculated by subtracting
exports from imports had a statistically significant and negative impact on chickpea
production. This indicates that greater volumes of imports will increase the domestic
supply and reduce the price and as a result less incentive for farmers to cultivate the crop.
Similarly, the government policy variable-NFSM also had a significant and positive impact
on the cultivation of pigeon pea in states like Karnataka and Madhya Pradesh whereas
NFSM had a negative and significant impact on the cultivation of chickpea in Maharashtra
and Madhya Pradesh.
Table 10.1 Descriptive Statistics for Variables used in the Model
Chickpea Pigeon Pea

Variable
Mean Std. Dev. Mean Std. Dev.
Ln MSP 7.499 0.356 7.699 0.483
Ln Yield 6.584 .269 6.545 .299
Ln Prices of Competing crops 7.0795 0.609 7.124 0.573
Ln own Prices 7.654 0.381 7.904 0.441
Ln Cost of Cultivation 7.521 0.344 7.667 0.434
Ln Rainfall 4.192 0.886 6.895 0.235
Chickpea Pigeon Pea
Variable
Mean Std. Dev. Mean Std. Dev.
ln Lagged net volume 18.888 0.817 19.526 0.653
NFSM dummy Karnataka 0.15 0.360 0.15 0.360
NFSM dummy Maharashtra 0.15 0.360 0.15 0.360
NFSM dummy Madhya Pradesh 0.15 0.360 0.15 0.360
NFSM Rajasthan (Uttar Pradesh for Pigeon Pea) 0.15 0.360 0.15 0.360
Table 10.2: Variable Definitions

Variable Definition
Ln area Log of Area under cultivation of crop
Ln MSP Log of Minimum Support Prices
Ln Yield Log of yield of the crop
Log of prices of competing crops (Jowar(Karnataka), Cotton (Maharashtra),
Soybean (Madhya Pradesh), Bajra (Rajasthan) for Chickpea. Jowar(Karnataka)
Ln Prices of Competing crops
Cotton (Maharashtra) Soyabean (Madhya Pradesh), Wheat (Uttar Pradesh)
for Pigeonpea
Ln Prices of Chickpea Log prices of Chickpea
Ln Cost of Cultivation Log of Cost of Cultivation
Ln Rainfall Log of average Rainfall
ln Lagged net volume Log of lagged net volume (Imports of the crop-exports of the crop)
NFSM dummy Karnataka NFSM interaction dummy variable for Karnataka
NFSM dummy Maharashtra NFSM interaction dummy variable for Maharashtra
NFSM dummy Madhya
NFSM interaction dummy variable for Madhya Pradesh
Pradesh
NFSM dummy Rajasthan NFSM dummy variable for Rajasthan
Table 10.3: Supply Response Regression Results for Chickpea

Variable Coef. z stat
Ln Area
L1. 0.909 (.272) 3.34***
L2. -0.230(.138) -1.67*
Ln MSP 9.197(.665) 13.82***
Ln Yield -.556(.222) -2.51**
Ln Prices of Competing crops -8.34(3.44) -2.42**
Ln Prices of Chickpea 1.511(.534) 2.83**
Ln Cost of Cultivation -1.389(.492) -2.82**
Ln Rainfall 3.23(5.47) .59
ln Lagged net volume -.077(.039) -1.95**
NFSM dummy Karnataka 0.447(.410) 1.09
NFSM dummy Maharashtra -.194(.122) -1.58
NFSM dummy Madhya Pradesh -.2405(.103) -2.33**
NFSM Rajasthan 0.209(.341) .61
Constant -16.99(9.53) -1.78*
Variable Coef. z stat
No of observations 15
Wald chi2=303.04
Prob >chi2=0.000
AR(1) test p value .0728
Note: *, **, and *** indicate significance levels at 10%, 5%, and 1% level respectively. Robust Standard errors are in
parenthesis.
Table 10.4: Supply Response Regression Results for Pigeon Pea
Ln Area Coef. Robust Std. Err. z

Ln Area
L1. 0.489155 0.098764 4.95***
L2. 0.62235 0.06674 9.32***
Ln MSP 0.853062 0.117619 7.25***
LnYield -0.00529 0.084835 -0.06
Ln Prices of Competing crops -1.34377 0.09008 -14.92***
Ln Prices of Pigeon pea -0.04497 0.069264 -0.65
Ln Cost of Cultivation 0.077701 0.07483 1.04
Ln Rainfall -0.41329 2.58899 -0.16
ln Lagged net volume 0.057972 0.05446 1.06
NFSM dummy Karnataka 0.123902 0.023404 5.29***
NFSM dummy Maharashtra -0.06656 0.045979 -1.45
NFSM dummy Madhya Pradesh 0.077338 0.042099 1.84*
NFSM Uttar Pradesh 0.001732 0.015689 0.11
_cons 3.832438 17.93786 0.21
No of observations 31
Wald chi2=227.01
Prob >chi2=0.000
Note: *, **, and *** indicate significance levels at 10%, 5%, and 1% level respectively.
10.4 Conclusion
The supply response of two major pulses produced by 4 major states are analysed using
Nerlove’s expectation framework. The results from our analysis indicated that lagged area
under cultivation is significant in impacting the production of pigeon pea and chickpea.
Prices of competing crops had a negative and statistically significant impact in both the
models. The government policy variable-NFSM came out to be significant only in the case
of pigeon pea for two states. Interestingly, MSP was significant for both the crops.
Chapter
Conclusion and Policy
11 Implications
Pulses are rich in protein content and a major source of protein in Indian diet of all
categories of people. The protein content in pulses are double the protein content of wheat
and three times more than that of rice. However, the production of pulses was lagging
behind the population growth in India and this resulted in the widening of the gap between
demand and supply. The excess demand resulted in high and volatile prices. The excess
demand is primarily due to the stagnation in productivity which is further accelerated by
the decline in area under cultivation. As a result, the per capita net availability of pulses in
the country declined sharply over the years. The persistent deficit and the soaring pulses
domestic prices made it inevitable for the country to import pulses. Despite of being the
second largest producer of pulses, the dependency on imported pulses continues to grow
in the country.
The present research examines the factors affecting the production of pulses (chickpea
and pigeon pea), the impact of government policies such as MSP and NFSM on pulses
production, the factors influencing the farmers access and utilisation of MSP and the
pricing behavior of pulses importers, exchange rate pass-through and its implications.
The detailed household level survey was conducted for 3 major pulses-producing states.
They are Karnataka, Maharashtra and Madhya Pradesh. From each state, one of the major
pulses producing district was selected for further analysis. From Karnataka, Gulbarga
was selected, from Maharashtra, Wardha was selected, and from Madhya Pradesh,
Narsinghpur was selected.
Primary data was collected through a comprehensive household survey in the above
mentioned three districts of three major pulses-producing Indian States during 2017-2018.
The farmers were selected through a random sampling technique. The sample consisted
of 482 pigeon pea farmers and 316 chickpea. Out of which 227 farmers were cultivating
both chickpea and pigeon pea. The survey was conducted through questionnaire, framed
in such way as to draw out details covering household characteristics, wealth and farm
characteristics, institutional and access related variables, risk and economic factors.
After discussing the background, objectives, data and methodology in the first chapter,
the second chapter provided an overview of pulses economy with a special emphasis on
the trends in area, production and yield in comparison with world. The analysis broadly
showed that there had been a substantial decline in area and production of pulses in
India. Indian yield was much below the world average and the yield gap between the two
got widened since 2001. It was the same year, the decline in production of pulses was
more prominent. However, in the year 1991, the yield gap got narrowed and came very
close to the world average. Interestingly, this was the same year when India marked a
record production in pulses. The declining share in area and production and widening
gap between the yield is very alarming in the context of an increased demand for pulses.
Since it is a protein rich crop, and there is a decline in per capita availability of pulses,
considerable efforts are required to boost the production. The year 2016-17 shows
marginal increase in the production of pulses. Though the dominant producing states
have either continued or marginally improved the production, an increase in production
was observed by other states who were not major contributors of pulses. This could be
due to the impact of government policies such as an increase in MSP or the efforts to boost
production through National Food Security Mission(NFSM).
The 5th chapter provided an overview of the socio-economic profile of the sample
households. The total households interviewed were 572 drawn from three major
pulses producing States-Karnataka, Maharashtra and Madhya Pradesh. Majority of the
households in the sample were either semi medium or medium farmers and agriculture
was the main livelihood option for majority of the sample households. Narsinghpur
(Madhya Pradesh) had the highest share of large farmers in the sample whereas Wardha
(Maharashtra) had the highest share of marginal and small farmers. In our sample, 482
farmers were cultivating pigeon pea and 316 farmers were cultivating chickpea. Out of
which 227 farmers were cultivating both the pigeon pea and chickpea. Majority of the
sample households didn’t have any awareness of government schemes to promote pulses
production or new production techniques to reduce crop loss and improve productivity. The
farm size wise analysis showed that large farmers were more aware about new production
practices as compared to other farm categories. However, the access to training offered by
government and extension services were the highest among the sample households from
Wardha (Maharashtra). Interestingly, despite having higher access to training, extension
services and knowledge about government schemes and new production techniques, the
Pradesh) had the highest share of large farmers in the sample. The size wise percentage of
farmers who received training showed that large farmers had received more training. The
training was relatively higher for semi medium, medium and large farmers as compared
The analysis in the 6th chapter showed that there has been a substantial increase in the
imports of most of the pulses in the last several years. Also the share of India’s imports
in world imports of pulses also showed a sharp increase. This points out the increasing
import dependency and severe supply deficit that India is facing in terms of meeting the
demand for protein rich crop. The widening gap between supply and demand, and the
domestic uncertainties with respect to the production etc. might continue to increase
the import dependency unless effective policy measures are undertaken to improve the
production and productivity and pulses. The implications of long term dependency on
import depends upon the nature of import pricing that is undertaken by the importers as
we have already discussed the import of each type of pulses is dominated by one or two
single largest importers. This may increase the potential for monopoly pricing.
Chapter 7 did an analysis of pricing behaviour of pulses importers in Indian market
and the exchange rate pass through into imported pulses prices. When the currency
of importing country depreciates, the import is expected to become costlier. However,
if the exporter is absorbing part of the increase in price to retain the market share in
the importing country, then the exchange rate pass-through into import prices will be
partial or incomplete. The elasticities of import prices with regard to changes in the
exchange rate can range from 0% to 100%, depending on the pricing strategy of exporters.
Additionally, it also shows whether an exporter is following a producer pricing strategy
or local currency pricing. The former takes place in a perfectly competitive setting where
the low of one price is expected to prevail due and as a result any change in exchange
rate will get fully transmitted to import prices. The latter takes place under imperfect
competition. Employing the econometric technique of Panel Corrected Standard Errors
(PCSE) estimation technique in Pricing to Market (PTM) framework, the results from our
analysis showed that the most of the importers were practicing non-competitive pricing
behaviour due to both the market specific characteristics as well as exchange rate induced
effects.
The significance of the exchange rate parameter βi and the country-specific effects
parameter λi in most of the models indicates that the importers work with a fluctuating
exchange rate and a varying mark-up over marginal cost. The analysis of the asymmetric
effects of exchange rates through an interaction dummy showed that for majority of the
products, the appreciation of the Indian rupee against the partner country had greater
impact than the depreciation.
The analaysis of the exchange rate effect showed that local currency price stabilization
by the Indian importers was more prominent than the amplification of exchange rates.
This is indicating competition among other importers.
Chapter 8 discussed the evolution of agricultural and food security policies in India along
with the effectiveness of MSP and procurement. The data and studies at the national level
broadly indicated that MSP is an important policy instrument in encouraging farmers
and to stabilize market prices. However, the percentage of farmers who were aware
of MSP was less especially for pulses. This was also reflected in the lack of knowledge
about procurement agencies. Interestingly the percentage of households who sold their
products to procurement agencies were even lower than the percentage of households
who had information about procurement agencies. In chapter 5 our analysis of sample
households from three states selected for analysis also showed poor awareness of MSP.
The farmers who avail MSP even with a positive information about MSP was also lower.
Therefore, in chapter 9 we analysed the factors influencing the access to information

regarding MSP and the decision to avail MSP. The conditional (recursive) mixed process
regression equation was estimated using the CMP command which uses the mixed
process estimator. The results showed that Maharashtra farmers were more enthusiastic
in availing MSP despite of the fact that the information regarding MSP was highest among
the farmers from Madhya Pradesh. However, farmers who had more diversified crop
cultivation were not very enthusiastic in availing MSP. The majority of the farmers in
Madhya Pradesh in our sample were large farmers and most probably they are more
diversified. Market access came out to be as an important factor in information and in
availing MSP. The risk faced by farmers also increased the chances to avail MSP and this
points out how important MSP is in mitigating the negative effects of risk.
The supply response of two major pulses produced by 4 major states are analysed in
chapter 10 using Nerlove’s expectation framework. The results from our analysis indicated
that lagged area under cultivation is significant in impacting the production of pigeon pea
whereas the yield was significant in the case of chickpea. Prices of competing crops had
a negative impact in both the models. The government policy variable-NFSM came out to
be significant only in the case of pigeon pea. Interestingly, MSP was significant only in
the case of pigeon pea and not for chickpea. This shows the government policies are not
significant in influencing the production of chickpea.
To sum it up, the study provided evidences for non-competitive pricing behavior of
importers. In the context of an increase in import dependency on the one side and the
concentration of exporting countries on the other side, the non-competitive pricing
behavior can have huge implications on the domestic price behavior and volatility.
Additionally, the depreciation of Indian currency can make import costlier. Therefore,
policies to enhance domestic production needs to be scaled up. As far as the policies are
concerned there is a huge information asymmetry among the farmers. Most marginal
and small farmers were deprived of the information, training and extension services
whereas large farmers had greater access to all these. Another interesting observation
was the lack of awareness of MSP among pulses producing farmers. Even those farmers
who had information about MSP did not avail MSP due to the delay and uncertainty in
price settlement. Additionally, the distance to procurement centers results in heavy
transportation cost and thereby the distance to market and procurement centers reduced
the probability of availing MSP.
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Production, Markets and Trade:

Centre for Management in Agriculture

Production, Markets and Trade:

Centre for Management in Agriculture

Chapter 4 National Food Security Mission and Pulses Production 31

Chapter 8 Minimum Support Price Policies 89

Table Title of the Table Page

Figure Title of the Figure Page

Therefore, in chapter 9 we analysed the factors influencing the access to information

1.2 Key Issues: Production Uncertainty and High Import Dependency

Given the significance of government intervention in pulse production, one of the

1.3 The detailed objectives of the study can be listed as follows,

1.5 Data Collection

1.7 Chapter Scheme

Figure 2.1: Area under Production of Pulses (in Thousand Hactors)

Figure 2.3: The Trends in Production of Pulses

Figure 2.4: Production of Indian Pulses as Percentage of World Production of Pulses

2014-15 2015-16 2016-17

Source: CMIE States of India

2014-15 2015-16 2016-17

Source: CMIE States of India

2014-15 2015-16 2016-17

Source: CMIE States of India

Rajasthan Gujarat India

Source: CMIE States of India

2013/14 2014-15 2015-16

Source: CMIE States of India

2014-15 2015-16 2016-17

Source: CMIE States of India

Table 2.4: Production Share by Major Pulses Producing States

Source: CMIE States of India

2014-15 2015-16 2016-17

Source: CMIE States of India

2014-15 2015-16 2016-17

Source: CMIE States of India

2014-15 2015-16 2016-17

Source: CMIE States of India

Figure 2.15: Production of Kidney Beans in Major Producing States

2014-15 2015-16 2016-17

Source: CMIE States of India

3.2 Consumption of Pulses

As mentioned previously, in India, the rate of an increase in the production of pulse

3.3 Production Technologies

Improved Varieties or Hybrids

Table 3.3: Promising Intercropping for Different Pulse Producing States

Mechanization in pulses comes next in the vertical approach. Mechanisation of soils

Integrated Pest Management

3.5 Major Varieties

3.5.1 Rabi Pulses

Drought-tolerance capacity of chickpea finds expression in crop mixtures which are

3.5.2 Kharif Pulses

Figure 4.1: States covered by NFSM for Pulses

Table 4.2: Districts Covered under NFSM-Pulses in the Study States

Madhya Pradesh Agar Mandla

Maharashtra Ahmednagar Nanded

Year Area(000 Ha) Production(000 Tonnes) Yield(Kg/Ha)

Year Area(000 Ha) Production(000 Tonnes) Yield(Kg/Ha)

4.5 NFSM in Karnataka

Australia -0.47 -1.76* 1.95 3.04* 0.07 2.28