Commodity Analysis

The flare-up in pulses

Aarati Krishnan | Updated on January 24, 2018 Published on June 14, 2015



India has been facing a growing shortfall in pulses, with annual output running perpetually short of demand

With a 15 per cent year-on-year rise for April, pulses have been one of very few components of the Wholesale Price Index (WPI) which have shown inflationary tendencies in recent months. The index itself dipped by 0.25 per cent in May. Pulses — which make up a staple component in Indian cooking — have soared on seasonal shortages in recent months. Retail prices of tur (arhar) dal averaged ₹91/kg on an all-India basis this May, compared with ₹70 a year ago.

The price rise in some markets in the South has been as high as 52 per cent. Prices of urad dal have averaged ₹91, against ₹69 in the same time last year.

Pulses, such as chana and moong, are up to a lower degree, trading about 25 and 10 per cent higher compared with the same period last year. But the flare-up in pulses cannot be attributed to seasonal factors alone. Instead, prices seem to be responding to a sharp drop in pulses output this year. Recent estimates by the Agriculture Ministry have slashed the pulses output for 2014-15 to 17.38 million tonnes. This is over two million tonnes short of the 19.5-million-tonne target initially set for the year. It also represents a good 12 per cent drop from the actual output for 2013-14. Pulses are largely grown as a rabi crop in India, with the sesaon accounting for two-thirds of the annual crop.

This time around, unseasonal rains in major growing states of Maharashtra and Madhya Pradesh have contributed to heavy crop losses and a sharp decline in the final output. Tur dal, gram and moong have witnessed sharp cutbacks in output.

Supply fails to keep up

But this year’s weather-related troubles have only aggravated India’s long-term supply deficit in pulses. The country has been facing a growing shortfall in pulses in recent years, with annual output running perpetually short of demand. In recent years, the country has witnessed a significant shift in the consumption pattern of households, away from the carbohydrate-rich cereals to the protein-rich pulses.

Rising incomes have essentially prompted households to temper their cereal intake while increasing their protein intake which, in a vegetarian diet, is represented mainly by pulses. The burgeoning demand for pulses, however, hasn’t been met with an equivalent production response.

After increasing from 13.3 million tonnes to about 18.2 million tonnes between 2005-06 and 2010-11, pulses output has since stagnated at between 18 and 19 million tonnes. The output estimated for 2014-15 is, in fact, much the same as levels four years ago.

Though the Centre does announce a Minimum Support Price (MSP) for key pulses each year, pulses are not covered by the procurement mechanism of the Food Corporation of India as is the case with rice or wheat.

Shortfalls in market price vis-à-vis MSPs are supposed to be stemmed through market intervention by NAFED, Central Warehousing Corporation and so on, which often don’t prove as effective.

Though India is the largest global producer of pulses, it is the most prodigious consumer too. Thus, the expanding domestic shortage of pulses has been met mainly through imports. India imports peas from Canada, Russia and the US, chana from Australia and Russia, moong and urad from Myanmar and tur dal from Tanzania, Myanmar, and Mozambique.

In 2014-15, India is estimated to have shipped in 4.6 million tonnes of pulses to supplement the 17.4-million-tonne domestic crop, a fifth of the year’s requirement. With the domestic requirements in mind, pulses imports have been permitted at zero duty, with this concession recently extended until September 2015.

However, meeting domestic shortfalls in pulses through imports is not necessarily an economical option. Despite generally bearish trends in agri commodities, global prices for quite a few pulses (urad, moong, tur) had firmed up to levels above Indian prices in recent months.

Given India’s sizeable consumption needs, news of crop failure in India usually leads to global prices of key pulses spiking. Therefore, though the shortfall may be bridged through imports, domestic prices of key pulses appear likely to remain firm in the months ahead.

Published on June 14, 2015

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