Why are pulses' prices high despite decline in wholesale price?

Retailers are looking to protect margins as high as 40%; millers seek fixing of retail margins at 15-20%

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In a major setback for the government, consumers are yet to get a respite from high pulses’ prices due to retailers’ reluctance in passing on the benefits of a decline in wholesale prices.

In most cities, wholesale prices have declined by as much as 40% since its June peak. But, retailers have passed only a part of this price fall on to consumers. For example, the price of urad dal in the benchmark Delhi wholesale mandi have fallen by 20% since its recent peak on June 16, according to data compiled by the Ministry of Consumer Affairs. However, prices at the retail end have declined only 11%. Similarly, tur dal in the wholesale Delhi mandi fell by 23% since June 16 to trade currently at Rs 95 a kg. But retail price has declined by only 20% to Rs 120 a kg.

Experts attribute the elevated level of retail pulses’ price to two things. First, bulk retailers continue to keep their margins intact at 40% due to the lack effective government regulations and second, higher purchase price does not allow retailers to sell at a loss.

“Traders and millers are not keeping any stock now and hence, they have stopped buying beyond the stock limit level resulting into excess supply for stockists. But, millers are selling dal at a very low price to retailers. But, retailers have kept their margins intact at 40 per cent. Consequently, despite dal price falling in the wholesale markets continue to remain high for retailers,” said S P Goenka, Director, U Goenka Sons, a pulses importer.

Interestingly, when tur price hit Rs 200 a kg in mid-June, the government raided a number of importers, wholesalers and stockists and seized a large quantity of pulses which was later released. India faces around 5.5 million tonnes of pulses supply deficit to meet its annual consumption of 23.5 million tonnes. This year the deficit aggravated due to deficient rainfalls for the last two monsoon seasons resulting in lower acreage and harvest.

The above normal monsoon rain this season, however, has prompted farmers to sow more pulses, resulting in an almost 50% jump in acreage.

“The government must fix a retail margin for large retailers which should not be more than 15 per cent. In worst case, however, it should not be more than 20 per cent. The moment retailers’ margins are fixed and the government’s raids on checking the price differential between the purchase and sell begins, retail pulses price would automatically get aligned with wholesale price. It would translate immediate benefit for consumers,” said Pradeep Jindal, Director, Jindal Overseas.

“We have already written to the Prime Minister in this regards which has followed actions on major hypermarkets that are selling 1 kg of tur dal at Rs 99. Interestingly, they are selling just one kg of pulses to each buyer. With this, pulses prices have started coming down in retail markets. Its full impact, however, would be seen in the next two-three weeks,” said Goenka.