Food inflation soars, but dal prices stay on the sidelines

Roti (wheat) is becoming increasingly expensive due to soaring world prices and a heatwave-affected national harvest – but this is not the case for dal (pulses), whose retail prices are lower than a year ago despite the rise in food inflation.

One of the main reasons for this, according to dal millers and traders, is the fear of government crackdown on any activity remotely reminiscent of speculative hoarding. They specifically cite an order issued last July by the Department of Consumer Affairs (DCA), which imposed storage limits on all pulses except moong (green gram).

Ironically, this came after the Union Government enacted the Essential Commodities (Amendment) Act, one of the Three Agricultural Reform Acts, in September 2020.

“It was totally unexpected and had a chilling effect on trade. No one wants to take any risk after this,” said a prominent pulses trader in Indore.

The decree of July 2 imposed storage limits (“on all pulses combined, except moong”) of 200 tons for wholesalers, 5 tons for retailers and the production of the last three months or 25% of the annual installed capacity. (whichever is greater) for suckers .

On July 19, these limits were raised to 500 tonnes for wholesalers and the last six months’ production or 50% of annual installed capacity (whichever is greater) for millers. In addition, importers were exempt from any limits, but had to declare their stocks of pulses on the DCA portal.

“The stock limits were in effect until October 31 and could expire. Also, harvesting and market arrivals of kharif (post-monsoon) pulses had started,” the trader pointed out. But there is no guarantee that they will not be reimposed. “The limits were imposed in July 2021, when the farm laws were still there, despite being suspended by the Supreme Court. The actual repeal did not happen until November 2021. Today the laws themselves do not exist and nothing, even on paper, prevents the government from bringing back the stock limits,” he added.

Speculative trading normally takes place when production is low and traders begin to accumulate inventory, sensing opportunities for higher prices in the coming months. There were enough opportunities this time due to not too big kharif harvest. A prolonged dry spell in July affected both moong and urad (black gram) production. In tur/arhar (pigeon pea), damage was caused by excessive rain at harvest time.

But fear of punitive action meant no one even tried to play the market.

This is confirmed by DCA data. The average (most quoted) modal retail price of chana dal for all of India was 70 rupees per kg on Friday, down from 75 rupees a year ago. Prices also fell for tur (from Rs 110 to Rs 98.5), urad (Rs 107.5 to Rs 98) and moong (Rs 105 to Rs 95), while they only increased than for the masur or the coral lens (Rs 82 to Rs 92.5).

Nitin Kalantari, a dal factory owner and trader from Latur in Maharashtra, also attributed the low, if not negative, pulse inflation to the liberal import policy of the Union government. The total effective duty on masur imported from Canada and Australia was reduced from 33% to 11% on July 26 — and zero on February 12.

The government on March 29 also announced that it would allow imports of tur and urad dal at zero duty until March 31, 2023.
Free imports, coupled with a latent fear that the government will reimpose stock limits at any time, have at least ensured that there is little to no inflation in the dal – even if it is not the roti.

About Francis Harris

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