Festive season to push up demand: ASSOCHAM study

Top Stories

»	Sensex, Nifty open 1 pc lower amid West Asia tensions, weak global cues
»	India clocks robust 7.7 pc GDP growth in 2025-26, Q4 growth at 7.8 pc
»	RBI keeps repo rate unchanged at 5.25 pc, maintains ‘Neutral’ stance
»	Crude oil prices fall over 1 pc as ceasefire hopes ease West Asia concerns
»	Forced labour import curbs: US proposes up to 12.5 pc tariff on 60 countries, including India

SME Times News Bureau | 11 Sep, 2012
Prices of essential commodities like sugar, edible oil, milk and its products may see a sharp rise at the retail level in the ensuing festive season because of a combination of factors, mainly including shortfall in rains in many parts of the country, an ASSOCHAM study forecasts.

Consumers are likely to feel the pinch of rising food prices in the upcoming festive season, as shortage of rainfall in growing areas with high demand could push up prices further, said apex industry body in a press statement.

In the 2012-13, sugar production is expected to be lower at around 25 million tonnes as Maharashtra and Karnataka have received very less rains so far this year. Karnataka is estimated to produce 3.8 million tonnes of sugar this year.

However, sugar production in Uttar Pradesh, the country's second largest sugar producing state, is seen to be at around the current year's level of 6.8 million tonnes.

Traditionally, India's economy witnesses a busy season with the onsetof festivals mainly, Diwali and Durga Puja and then Christmas towards the end of calendar year. They will boost demand for sugar, edible oil, pulses, milk etc.

"The price of milk and milk-based products in India is set to surge on the back of a variety of natural and human factors, including shortage during monsoon months, added the ASSOCHAM paper.

In the last one year, prices of milk have increased by about 25% and any further rise in rates could have an adverse impact on food inflation, which rose to 10.6 per cent for the week ended July 12.

The chamber said fodder scarcity and export of cattle fodder are some of the main reasons which had pushed up the milk prices in the country.

"With milk prices going up, the prices for milk-based products like butter and cheese will also increase," said Mr. D S Rawat, Secretary General ASSOCHAM.

India is the world's largest milk producer with more than 110 million tonnes of production. However, the growth in production is lower than the rise in demand.

With rising demand and falling production, edible oil prices climbed tremendously in India for the past one year. According to ASSOCHAM Research report, the price of groundnut oil and mustard seed oil has gone up by 25% in a year's period. The shortage oilseed for crushing has raised the price of the oil in the domestic market.

Edible oil companies are expecting an increase in demand from institutions and retail consumers. Edible oil demands by institutions (biscuit and snack manufacturers and restaurants) may further increase at the retail level by 10-15 per cent in the festival. In consumer packs, edible oil demands will increase by 20-25% due to seasonal demand.

Due to a fall in pulses acreage owing to deficient rainfall, prices have increased by 10% to 15% in the recent few months. Moong acreage has fallen by about 50% in major growing states like Rajasthan, Maharashtra and Karnataka. The rising moong prices have lifted tur prices by Rs 10 per kg during the last one month. Urad prices have increased Rs 10 per kg to Rs 15 per kg since July.

Tea prices have already inched up by Rs 20-25 per kg as production is lower. "Since arrivals have been low at the auctions, prices are likely to go up during the festival season as demand will multiply several times," reveals the ASSOCHAM paper.

Similarly, basmati companies anticipate an increase in demand. Families prefer quality basmati for festival delicacies. It is also witnessing increase in demand in export and domestic markets by 30-35%, highlights the ASSOCHAM paper.