Chilli prices spiralling on artificial scarcity

Red chilli prices up around 50% in one month

Red chillies have suddenly become so hot that seasoned traders are flummoxed at the unusual swings in rates. Prices of red chilli have risen around 50 per cent within a month. They have gone up from Rs 2,000 a quintal, and have started hovering around Rs 3,000-3,200 a quintal on Tuesday.

"It is difficult to pinpoint any single reason for the sudden spurt, but most of it can be attributed to fears of low harvest and forward market speculation," said Prakash Wadhwani, senior vice-president of Nag Vidarbha Chamber of Commerce (NVCC), and a leading exporter of chillies.

Traders admitted that the price hike was artificial and there was no big demand pull from consumers. "But, it is rising and the fluctuations are unprecedented," said a trader. Fears over the possibility of the crop being affected by Andhra Pradesh rains had led to hoarding, and that could have impacted the spot rates, he said.

"It rained for three days and the rates jumped by Rs 1,000. When it stopped pouring for just a couple of hours, the rates plummeted by Rs 300. This type of volatility in chillies has never been witnessed," said the trader.

Nagpur is a big market for red chillies and the sprawling yard of the Agriculture Produce Marketing Committee (APMC) here has over 100 traders, who deal in red chilli. Most of the crop comes from Gujarat, Andhra Pradesh, Madhya Pradesh, Chhattisgarh and Maharashtra.

Last year was a bumper crop year, and as prices were hammered down by over supply, almost all traders bought at chillies at cheaper prices, and thus stockpiled substantial quantities. Obviously, they are happy with the hike in prices but do not exactly know till what time this bonanza would last. Interestingly, the new crop will come in January and if there are enough sunny days till then, Andhra Pradesh, despite the rains, could again have a bumper crop.

Traders said there was no logic behind the panic buying, as harvest continues till March and also as many as 12 different types of crops enter the market.

An Andhra Pradesh trader Valliappa Nasir said the state government was offering subsidy on other crops as a result of which farmers were not very keen on chilli cultivation this year. This could have had an impact on the chilli prices, he said.

Wadhwani said the high prices had badly affected exports, down almost 90 per cent. "We are unable to match the rates being offered by the Chinese or the Pakistanis," he said, adding that "Indian chillies are of superior quality and preferred when prices are even."