Pulses' prices see unprecedented spike in 2015

The run up could be due to weaker supply for a second straight year

This is not the first time that the output of pulses had dropped from a year before. The unusual part was the steep price spurt this year, particularly since June.

This could be due to weaker supply for a second straight year. Besides, production of arhar and gram, the two biggest grown in the country, was both less in 2014-15 (July 2014 to June, 2015) as compared to 2013-14.

Before 2014-15, the country saw a dip in overall production in 2011-12, when output dropped to 17.1 million tonnes from 18.2 mt the previous year, a fall of 6.3 per cent. The dip was 9.5 per cent in 2014-15 production as compared to 2013-14. However, a surge in prices was arrested in 2011-12. Unlike the price movement in 2014-15, there was no sudden spike in prices between June to September in arhar in 2010 or 2011.

Consumer ministry data shows the All India monthly average retail price of arhar (tur) between June to September 2010 and 2011 fell from Rs 67 a kg to Rs 61 a kg, and from Rs 62 to Rs 61 a kg, respectively. In 2012, the this measure showed a rise of 13 per cent in the same period for arhar. In 2014, the rise was six per cent. It was only in 2015 that the monthly average retail price of arhar rose 26 per cent between June and September.

In the period from 2011-12, the demand of pulses would have risen much more than has been captured so far, as the latest  data on consumption by the National Sample Survey Office pertains to 2011-12. Whatever the reasons, the price movement in pulses this year had little precedent in the immediate past.

Of course, the production fall in arhar in 2011-12 was much lower at 7.3 per cent as against the almost 10 per cent estimated drop in 2014-15 but was it so significant to push prices up so sharply? The biggest drop in production in 2011-12 was in gram, the biggest dal variety grown in India. In 2014-15, gram production fell by 20 per cent from the previous year and the price increase was 32 per cent. Gram output dropped 6.3 per cent in 2011-12 from the previous year.

A common solution suggested by many experts has been to give price signals to farmers to increase production, but data shows that unless these signals are more than the market price, farmers do not tend to shift towards pulses. Data shows that since 2010-11 to 2014-15, MSP of pulses has been increased by over 50 per cent, but the area under pulses has remained static at around 23-26 million hectares per year.

“It is difficult to say why a drop in production in 2011-12 as compared to 2010-11 did not push up prices to the same extent as they did in 2014-15, as panic could vary from season to season. Like earlier when the onion crop failed, prices rose to almost Rs 100 a kg but this time the increase was limited to Rs 70 a kg. I feel a subsequent fall in arhar production for three straight years and limited import options created this scenario,” Madan Sabnavis, chief economist at CARE Ratings told Business Standard.