In April 2020, the retail prices of Moong and Urad increased by 25% and 11% compared to their five-year monthly average prices. Also, the retail prices of Moong in 2020 have consistently remained 25% more than the monthly five-year average prices for the period of March to July. An increase in prices of pulses affects consumption and has ramifications for food and nutritional security. Indeed, pulses are crucial for ensuring nutritional security in India considering that India is the home for the largest malnourished population and also a higher proportion of the vegetarian population for whom pulse is the major source of protein. Furthermore, the different pulses (like pigeon pea, Urad, and Moong) have low substitutability between them, are used in different preparations, and there is a significantly different demand pattern across states. The increases in prices of Moong and Urad – particularly when the broader economy is reeling under the effect of COVID-19 pandemic – deserves a closer look. In particular, how have relatively recent production scenarios, domestic price policies, and trade restrictions spurred the price increase?Figure 1: Retail prices of Moong in 2020 compared to the 5-year monthly average prices. Source: Department of Consumer Affairs, GOI. Figure 2: Retail prices of Urad in 2020 compared to the 5-year monthly average prices. Source: Department of Consumer Affairs, GOI.As we can see from the figures, Moong and Urad retail prices in 2020 have consistently remained above the average monthly prices.However, in the case of Moong, the prices in the last four months have remained more than 25% of the average price. Has this happened before in the recent past? Yes, the price rise of such magnitude was seen during 2015, fuelled by a shortage of pulses and a simultaneous spike in international prices.In Figures 3 and 4, we have plotted seasonal plots for Urad and Moong, over the last five years.Figure 3: Seasonal plot for retail prices of Urad. Source: Department of Consumer Affairs, GOI. Figure 4: Seasonal plot for retail prices of Moong. Source: Department of Consumer Affairs, GOI.From the figures, it is evident that the increase in retail prices in Moong is a serious concern and it is bigger than the price spike India witnessed in 2015-16.Whereas in Urad, the price situation is not as alarming as Moong. It is also interesting to observe that, after the price spike in 2015 and 2016, the prices of both commodities started to decrease, and in subsequent years prices remained low around the Rs 70-80 band.This fall in prices of Urad and Moong can be explained by the significant area led to growth in the production of these two commodities.Figure 5: Area, production and productivity of Urad in the last decade. Source: Directorate of Economics and Statistics, Government of India. Figure 6: Figure 6:Area, production, and productivity of Moong in the last decade. Source: Directorate of Economics and Statistics, Government of India.As Figures 5 and 6 show, the area under both Urad and Moong started to increase from the 2015-16 period and continued to do so in the years to follow.The area increase is observed mainly in the states of Rajasthan, Madhya Pradesh, and Karnataka. This may be due to increased policy thrust for pulses with an increase in MSP for pulses (specifically price of moong increased by almost 25% in 2017-18) and also technological progress, as in the case of Moong where the release of short duration variety has resulted in large scale adoption by farmers in Rajasthan.With an increase in production and productivity, the retail prices started to fall and the gap between the MSP and retail prices also reduced over the years.Figure 7: Trends in the retail price, wholesale price, International price and MSP of Urad. Source: Department of Consumer Affairs, Commission on Agricultural Cost and Prices, and Ministry of Agriculture, Cooperation and Farmers Welfare – Government of India Figure 8: Trends in the retail price, wholesale price, International price and MSP of MoongFrom Figures 7 and 8, a few interesting insights can be drawn. Firstly, wholesale and retail prices move very closely, indicating efficient transmission of price between the retail and wholesale markets. Secondly, the domestic market prices closely followed the trend in international market prices, which again is an indication of integrated domestic and international markets.The difference between the minimum support prices and the retail prices has narrowed in the last couple of years, probably the effect of an increase in area and production and falling retail prices. As discussed earlier, policy impetus and technological progress, both have contributed to growth in the production of the two pulses.What explains the price spike in 2020?The preliminary analysis indicates that the increase in retail prices of Urad and Moong is due to supply-side shocks. Moong and Urad crops were damaged due to unseasonal rains and few newspaper articles quote up to 50% yield loss in a few places in case of urad.The third advanced estimates of Ministry of Agriculture and Farmers Welfare suggest that Urad production is expected to be 25% less than the triennium average.Also read: How India Can Leverage Surplus Food Grain to Expand PDS Without Sacrificing Fiscal PrudenceHowever, in case of Moong, there is no shortfall in production as per advanced estimates, though the production in rabi season marginally decreased by 5%. When we look at the trends in market arrivals, the arrival of Moong is reduced by 55% in Rajasthan, 16% in Maharashtra, 40% in Karnataka and 39% in Tamil Nadu for a period of January to July 2020, compared to the same period in 2019. As the advanced estimates indicate normal production, the changes in arrivals may be due to other factors such as COVID-19 induced lockdown.Another factor that might have caused an increase in prices of Urad and Moong is related to imports. The government of India has fixed an import quota of 2.5 lakh tons for Moong. However, the COVID-19 led travel restrictions seem to have affected the import of pulses as well, despite the extension of the deadline for importing from March 31 to May 30.News reports indicate that only 1.5 tons of Moong has been shipped from Myanmar so far and it is delayed due to COVID restrictions in both the countries.What do forecasts say?As per the latest report of All India Crop Situation, August 12, 2020 by the Ministry of Agriculture and Farmers Welfare, the area sown under pulses has recorded a very good progress.The moong is already sown in an area of 32.92 lakh ha, which is more than the average area (30.49 lakh ha) under the crop. Similarly, Urad is also sown in an area of 35.62 lakh ha (average area under Urad is 35.53 lakh ha) which is an encouraging sign. The prediction is for a good Kharif production of these crops. So, the market prices may start falling once the Kharif crop enters the market. However, we are in a situation where even speculations are hard to arrive at considering the amount of uncertainty in the present times.Also read: ‘Agriculture and Atmanirbharta’ Is a Noble Vision, but Needs Hard Decisions and Political ConsensusThere is COVID-19, a pandemic of a scale never heard before, whose duration and effects are uncertain, as well as recent Indian policy changes namely the removal of pulses from the essential commodities bracket and market reforms related to barrier-free trade outside the notified Agricultural Produce Market Committee yards, that are adding to an already volatile pulse market. This calls for continuous price monitoring and also a detailed analysis of the market situation at different stages of the supply chain to ensure that farmers get a remunerative price for their product and consumer gets the product at a reasonable price.It also calls for a detailed and continuous market intelligence inputs based on empirical analysis and forecasting of APMC wholesale prices as well as retail prices of commodities. If such inputs are generated on real time basis, Government can intervene in the market through mechanisms like price support scheme and/or price stabilisation fund.Aditya KS, Girish K Jha and Praveen KV are scientists at the Division of Agricultural Economics, ICAR-Indian Agricultural Research Institute, New Delhi.
