Alarm over sharp increase in prices of wheat and pulses

Gargi Parsai
The Hindu: 20 August, 2006

NEW DELHI: Delay in the arrival of imported wheat and hardening of wheat and pulses prices in the open market on the eve of the upcoming festival season has got the Government worried. Sugar prices too are not showing any decline from the Rs. 21 a kg level. They were Rs.16 a kg in the retail market a year ago.

Even after the Centre placed orders for import of 35 lakh tonnes of wheat for the Public Distribution System (PDS) and allowed private trade to import wheat at a nominal five per cent duty, the situation on the price front has not eased.

The low availability of pulses in the international market has impacted availability in the domestic market and kept the prices high. Myanmar is the main exporter of pulses, and with similar demands from Pakistan and Bangladesh, where production has declined this year, India has not been able to meet its import needs.

In such a situation, there seems to be no option before the Government but to re-introduce stock-holding limits under the Essential Commodities Act to make speculators offload stocks. The Government may also have to yield to the demand from wheat traders to allow private imports at zero duty, sources said.

So far, of the 35 lakh tonnes contracted for the PDS, five lakh tonnes should have arrived by May but only 92,000 tonnes were received. Another 3.39 lakh tonnes arrived last week, of which only 2.4 lakh tonnes have been offloaded. Another 1.72 lakh tonnes are "in the seas" and expected to arrive only by the month-end, sources said.Only 1.2 lakh tonnes of wheat imported by the private trade has arrived so far, although traders sought — and got — permission to import 22 lakh tonnes for the open market and roller flour mills, bakeries and confectionaries.

Clearly, the slow arrivals and the even slower offloading of hoarded wheat have caused an increase in the prices of wheat and "atta". The production of wheat this year was below expectations at 68.5 million tonnes, although the trade disputes this figure too.

The retail price of wheat in Delhi was Rs. 10 a kg this week. It was Rs. 14 a kg in Mumbai, Rs. 14.50 in Bangalore, Rs. 14 in Chennai and Rs. 16 in Thiruvananthapuram against an average of Rs. 9 to Rs. 12.50 a kg last year.

According to sources, the futures prices for August and September wheat contracts at Rs. 891 a quintal and Rs. 919 a quintal were lower than the spot price of Rs. 923 this past Tuesday. It is expected that spot prices would soften once the imported wheat arrives.

In the case of pulses, the wholesale price of tur, urad, moong and chana dal have shown sharp increases over last year. Over the past week, the retail price of moong has gone up by Re. 1 a kg and urad dal by Rs. 2 a kg.

India imported 16.08 lakh tonnes of pulses last year. This year, only 4.44 lakh tonnes were imported till June, adding to the problem of availability. The National Agricultural Cooperative Marketing Federation (NAFED) has contracted for 25,000 tonnes of urad and 5,000 tonnes of moong, but sources said only 3,880 tonnes had arrived in Chennai so far.