Price Cushioning for Pulses Farmers Through Minimum Assured Price (Map)

Dharmendra Pothuri General Manager-Africa Agribusiness Mahindra & Mahindra, Kenya

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Price Cushioning for Pulses Farmers Through Minimum Assured Price (Map)

United Nations declared 2016 as International Year of Pulses (IYP 2016) with the objective of positioning pulses as primary source of protein and other essential nutrients. Various initiatives were taken at local, national and international level to increase the awareness and understand the challenges faced by pulses farmers and other stakeholders in the pulses value chain.

While various stakeholders like Government bodies, NGOs, farmer societies, educational and research institutes and private organisations actively took up various initiatives, most unpredictable blow came in the form of price crash in pulses sector in India-the largest importing country in the world.

Highest price crash came in Pigeon peas segment which also affected green mung and chick peas segment resulting in huge losses for many traders and farmers.

The falling prices has not only impacted the farmers in India but also the farmers in all east African countries including Kenya, Tanzanian, Uganda, Malawi and Mozambique. Pulses crop is treated as cash crop by farmers and a sudden drop in market prices has forced them to switch over to alternate crop.

To motivate the farmers to increase the pulses production it is important to provide assured offtake mechanism in terms of quantity offtake and price guarantee so that they are cushioned from price uncertainties to certain extent.

With the intention of encouraging farmers and providing stable price for the farmers, Mahindra & Mahindra (www.mahindra.com) came out with innovative idea of Minimum Assured Price (MAP) in pulses segment to be piloted in Arusha, Tanzania. This is first of its kind concept in pulses segment, which guarantees farmers a minimum price based on the cost of production plus a fair profit margin.

With the help of International Trade Centre (ITC)’s Supporting Indian Trade and Investment for Africa (SITA) , Kingori SACCOS, a Tanzanian farmers’ organization is shortlisted for this pilot project. Under this unique model, Mahindra and Kingori SACCOS have agreed on a minimum price based on the cost of production plus a fair profit margin.

The cost of production was agreed by farmers and Mahindra through discussions facilitated by ITC and the Selian Agricultural Research Institute (SARI), Tanzania. Under the agreement, Mahindra guarantees the purchase of the August-September 2017 harvest of pigeon peas from over 100 farmers at the predetermined minimum price.

If the market price drops below the predetermined price, Mahindra will bear the loss. If the market price rises above the minimum, Mahindra and Kingori will share the incremental margin.

This is a unique win-win model with following benefits:

Benefits for Pulses farmers:
• A guaranteed buyer before production begins
• A reliable income without fear of a sudden price drop
• A fair price for their pulses
• An advance payment to finance their working capital requirements

Benefits for Mahindra:
• Expanded footprint in Africa through socially responsible trade
• A sustainable supply of pigeon peas
• A pre-determined and stable purchase price

This MoU was signed in the presence of HE Adolf Mkenda, Permanent Secretary, Ministry of Industry Trade and Investment, United Republic of Tanzania

This pilot initiative is being implemented under the International Trade Centre (ITC)’s Supporting Indian Trade and Investment for Africa (SITA), funded by the United Kingdom Department for International Development.

Based on the results of the project, Mahindra & Mahindra is planning to replicate similar structure with other farmer groups in other East African countries. In this way Mahindra & Mahindra wants to be part of inclusive development of pulses sector in Africa.

Price Cushioning for Pulses Farmers Through Minimum Assured Price (Map)
Price Cushioning for Pulses Farmers Through Minimum Assured Price (Map)
Price Cushioning for Pulses Farmers Through Minimum Assured Price (Map)

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Disclaimer: The opinions or views expressed in this publication are those of the authors or quoted persons. They do not purport to reflect the opinions or views of the Global Pulse Confederation or its members.