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Puzzling disparity in pulses prices

Harish Damodaran

NEW DELHI, May 20

ARE individual pulses substitutes with respect to each other? The general belief is that there are strong regional preferences when it comes to consumption of different dals. Chana (Bengal gram or chickpea) and moong (green gram), for instance, are consu med more in the North, while in the South, the preferred dals for making sambar or vada are tur (arhar or pigeon pea) and urad (black gram).

But notwithstanding such distinct regional consumer biases, there ought to be some degree of parity in price movements between different dals to justify the usage of the generic term `pulses'. And there is definitely reason to believe that when prices of any particular dal goes completely out of sync with that of others, consumers would shift to the cheaper pulses to meet their essential protein requirement. And in an integrated national market, traders, too, would pitch in and ensure that a certain bas ic parity in inter-dal prices is restored through their aggregate purchase and sales decisions.

In short, one may expect prices of different pulses to generally move in tandem, just as it is rare to find prices of say, wheat crashing at a time when that of rice are soaring. But interestingly, this is precisely what is happening on the pulses front.

It can be seen that over the last two years, prices of gram have shot up by between 18 to 53 per cent in Mumbai and Delhi, respectively, whereas that of tur have fallen by 17 per cent in Delhi and by a third in Kolkata.

What is particularly significant is that this trend of decline in tur and massive hardening of gram prices has been observed right across the country and not confined to a few isolated centers. Also, this divergent price movement has taken place over the last couple of years, which means that they have not been caused by any sudden local or temporary supply `shocks'. In any case, such one-time, one-place distortions tend to get `ironed out' over time in competitive markets, through exercising of correct ive arbitrage opportunities by numerous traders in various mandis of the country.

How does one, then, explain this phenomenon of divergent price movements in arhar and gram? One plausible reason may have to do with the profile of the concerned crops. Gram is the country's single largest pulse crop, accounting for 5-7 million tonnes (m t) of the total output of 12-15 mt. But it is a rabi crop, with more than 80 per cent of production accounted for by three States-Madhya Pradesh (40 per cent), Rajasthan (30 per cent) and Uttar Pradesh (10 per cent).

Tur, on the other hand, is a kharif crop with annual production of 2-3 mt. Tur cultivation is, however, somewhat more widespread, extending to Maharashtra, Gujarat, M.P., Uttar Pradesh and even Karnataka and Andhra Pradesh. Therefore, it is possible t o argue that tur prices would be relatively stable to that of gram and less prone to volatility. And given that MP and Rajasthan have borne a disproportionate burden of last year's drought, it would have correspondingly impacted on gram p roduction, resulting in soaring prices. Tur, in contrast, would have been insulated from such region-specific crop failure.

But this does not still fully account for the extent of divergent price movements in the two dals, that too observed over an extended period across the country. Apparently, there is still a long way to go for the emergence of a truly integrated, national market for pulses, generating appropriate price signals for farmers, processors, traders and consumers.