By Ruma Dubey

Crisil has put out a very telling report. In a very succinct research, the rating agency has stated how, during the past 10 years, on an average, every three years price of pulses have spiked up. That is, between 2004-05 to 2014-15, prices have risen 4 times.

So a quick look at the reasons behind the price rise:

• Weather induced supply disruption which causes a mismatch between increased demand and lower production.
• Hoarding is also a big cause – the moment traders know that there is going to be a shortage, they start creating an “artificial” shortage, hoping to cash-in when price rises.
• Production is concentrated in a few areas across the country – this makes it more vulnerable to vagaries of monsoon. The moment there is a drop in this one region, it causes a shortage all across India even if rest of the country has received enough rainfall and automatically a price rise – 70% of India’s annual production comes from Madhya Pradesh, Maharashtra, Rajasthan and Uttar Pradesh. Rajasthan suffered the worst monsoon deficiency and this is enough to cause price rise across India.
• The population keeps on increasing but pulses output has not kept pace with this growth – output is up less than 2% during the past 20 years. Acreage has risen less than 0.8% and yield rose just 0.9%. Pulses are not a cash crop and this means over a period of time, less and less area comes under pulses production. Of the total agriculture acreage, only 16% comes under pulses while wheat and rice is over 60-70%.

These reasons are nothing new. The very same causes have been in existence for the past 10 years, yet none of the Govt’s take corrective measures. No one, not even the very India Inc focused Modi has tried to find a permanent solution, meaning we might be putting up a very mature face on the FDI front but when it comes to farming policies, it is very poor.  Yes, the first step of creating a buffer stock has been taken but it will begin from this rabi season; the important point being that it needs to be sustained.

As one analyst has rightly said, the Food Corporation of India (FCI) could turn into a procurement agency not just for onions and tomatoes but for all pulses, including rice and wheat.

And yes, as we get ready to pay more for tomatoes and rice, things could get all the more bitter as sugar prices are also expected to zoom up. Today, sugar stocks were all up, many hitting new highs as there is expected to be a major shortage of sugar, domestically and globally. Rating agencies like Icra have stated that they expect a 5% decline in domestic sugar production during 2016. This, plus the compulsory export of 4 MT is expected to create a shortage, with closing stock of sugar to fall from 10.1 MT in SY15 to 7.6 MT in current SY16.

Hope salaries keep pace with these escalating prices.