The Hindu Business Line : Never mind lower inflation, here’s why you’re still paying more for food

Chennai, April 3 The inflation rate has dropped to almost zero, but the prices that you pay for food continue to remain high, especially for essentials such as rice, sugar and pulses.

A quick perusal of the price chart of a major retail chain shows that for commodities such as moong dal, toor dal and urad dal, prices have shot up by over 25-30 per cent from a year ago. The premium sona masoori rice, grown mostly in Andhra Pradesh and Karnataka, is costlier by over 40 per cent from the prices ruling a year ago.

Only edible oils and wheat have not dented the household budget as much. Wheat prices have remained steady — reflected in the prices of branded atta as well. Given the downtrend in oil prices, sunflower oil prices have actually declined over the past six months from October 2008.

Sugar prices, too, have gone up dramatically, by over 40 per cent from a year ago as the overall production will dip this year.

Reflecting global trends

The prices of what’s being put on your table actually reflect the demand-supply situation globally. Rice prices have increased in view of the tight supply last year, coupled with a higher support price fixed by the Government. The support prices, mainly for common varieties, help in superior varieties (sold in most retail chains) garner a better premium.

Wheat prices, however, have been stable on better supply and ample stocks following a record production of 78.4 million tonnes last year. All pulses, including toor and urad, have gained due to a lower crop.

Pulses prices, in fact, had come down last year after zooming to a record in 2007. Moong dal, for instance, at Rs 63 a kg in March 2007, dropped to Rs 49 in March 2008 and now rules at Rs 67.

The prices of pulses have gained this year, despite a ban on exports and the Centre allowing duty-free import, as the crop in supplying countries (such as Myanmar) has been reportedly affected.

Sooji, a by-product of wheat, has witnessed a rise in price in view of higher production costs incurred by flour mills.

Sugar prices have soared mainly in view of the current season’s (October ’08-September ’09) production being lower than 160 lakh tonnes against 264 lakh tonnes last year. While a section of the sugarcane farmers shifted to crops such as soyabean and cotton, the crop for many other farmers was affected by unseasonal rains.

Edible oil prices have shown a declining trend in line with the global market. Vegetable oil prices began their downslide mainly after crude oil rates crashed. At one point of time, vegetable oils were seen as an alternative to crude oil and mainly in production of bio-fuels. Malaysia, looking at rising crude prices, went ahead with setting up a few bio-fuel plants but the plan has come unstuck after the crash in prices.

Wholesale rates

At the wholesale level, prices of some of the edible oils are ruling at a two-year low, while increasing imports, facilitated by zero import duty, on crude vegetable oils, have also helped to keep the prices on a tight leash.

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