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India will honour Mozambique pigeon pea deal, but 2 million farmers still face crisis

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India says it will honour a commitment to import pigeon peas from Mozambique, but crops are still rotting in the fields, jeopardising the livelihoods of up to two million farmers.

Traders at Mozambique’s ports say they can’t export to India following a decree restricting India’s global imports of pigeon peas to 200,000 tonnes this year – brought in due to India’s own bumper harvest of the crop.

However, a deal signed by Prime Minister Narendra Modi on his visit to Maputo in 2016 means Mozambican pigeon peas are exempt from the global import cap, the Indian High Commissioner in Mozambique told Zitamar News.

“I have been clarifying to exporters who have been contacting me [that they can import Mozambican pigeon peas],” the High Commissioner, Rudra Gaurav Shresth, said.  “We’ve had a surplus production of pigeon peas in India, and so there’s been a notification on 5 August restricting total imports from all over the world to 200,000 tonnes – but in that notification there is a clause clearly exempting any bilateral or regional commitments or MOUs [memorandum of understanding].”

Mozambique is the only country that has signed an MOU with India to supply pigeon peas, although similar agreements are being negotiated with Malawi and Tanzania.

Under the five-year deal India agreed to import a minimum of 125,000 tonnes from Mozambique between 2017-2018. The intention is for this to be contracted through private traders, but if by January each year the import target has not been hit, the Indian government will buy the balance based on the minimum Indian support price, with adjustments made for procurement and freight costs.  This year the price is set at INR 54.5/kg (51 MZN/kilo).

The Mozambican press has reported that India is now reneging on this deal, but Shresth assured that the government has “every intention of honouring it.”

“What the Mozambique exporters need to do is contact their buyers, the importers on the Indian side, and send the certificate of origin, clearly clarifying that the shipment is coming from Mozambique. They can then use this to get permission from the director general of foreign trade, the agency which has issued the notification, and who have an office in every port, and they will give the importer an exemption certificate so they can clear the shipment,” Shresth told Zitamar.

“But this will be done only until a target of 125,000 tonnes is reached, which will be on a first come, first served basis,” he added.

As of late last week Shresth said about 32,000 tonnes of pigeon peas had been imported from Mozambique this year. He expects the remaining 90,000 tonnes of the quota to be met within the next few weeks.

Once the 125,000-tonne quota is met, many Mozambican farmers will be in trouble as Mozambique’s pigeon pea production this year “is far higher than the quota,” Shresth said.

Many farmers, mostly in Nampula and Zambezia provinces, are unable to shift their crops. Zitamar has heard reports of traders still refusing to buy beans– and those that are, are paying as little as 2-4 MZN/kilo for pigeon peas – compared to last year’s price of around 50 MZN/kilo.

Traders causing ‘panic’

Shresth said Mozambican traders may also taking advantage of the confusing situation to lower the price of the crop.

“The problem here is that the farmers are largely unaware of this whole dynamic because they sell directly to the traders, and the price – as happens very often in underdeveloped agriculture markets – is largely fixed by the traders, so certain amount of panic probably is being created by the traders deliberately so as to bring the price down further,” said Shresth.

It was hoped that by referencing the Indian minimum support price in the MOU, farmers would have more leverage with traders to raise their prices – as they would have the option instead to hold out and sell to the government at the end of the year.

“But in reality it has not worked like that because the farmers have no storage capacity, so effectively they have to sell at the time they harvest and at that time the traders fix the price,” said Shresth.

Traders contacted by Zitamar did not return calls seeking comment.

Neither the Mozambique nor the India government yet have answers for what to do with the harvest once the export quota has been met. “But that problem is in India too because we’ve had a bumper production,” Shresth said. “This is unfortunately a reality of agriculture commodities – there tend to be spikes and troughs.”

However, no one had expected a spike of production of this magnitude in India. A report put out by the USAID in September 2015 on the “emerging success story” of pigeon peas in Mozambique, forecast that “Rising and sustainable import demand from India for pulses is, for all intents and purposes, a certainty unless India experiences a sharp downturn in economic growth and/or a steep depreciation of the Rupee.”

Similarly, the surge pigeon pea production in Mozambique this year has taken everyone by surprise. “The MOU only talks of 125,000 tonnes, which at that time seemed fairly ambitious, because when we signed the MOU production was around 60,000 tonnes,” said Shresth.

As more farmers turn to cash crops, the crisis in Mozambique could affect up to 2 million farmers across central and northern Mozambique.

“We are not [providing]compensation to the farmers. We haven’t even had that discussion with the government of Mozambique, nor has the government approached us for anything like that, nor are we obliged of course to provide compensation to farmers who have produced beyond the target,” Shresth said.

“But we have an extensive development presence in Mozambique, including humanitarian assistance and developmental assistance, and if there are farmers in distress and the government wishes to structure the programme to support them we’d be happy to look at that proposal.”

© 2017, Zitamar Ltd. Reproduction and dissemination prohibited without written permission.

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