The going’s good for chana

Policy moves and weather will determine future outlook

For the second year in a row, helped by good monsoon and increased acreage, the production of all major pulses and lentils remains robust in the country. As a result, the prices of tur, moong, urad and masoor are running below their minimum support prices. The only exception is chana (chick pea) which contributes 40 per cent to India’s total pulses output.

A significant hike in support prices, tight fumigation import norms and imposition of heavy import duty on its close substitute (yellow peas) have worked in its favour and chana prices are running above support prices despite enough supply.

Going forward, rainfall and government policies will influence the price direction.

India is well-stocked with domestically produced and imported chana. Incentivised by high prices that touched ₹10,000/quintal in 2016, a total of 9 million tonnes (mt) of chana was produced in 2016-17. The total availability of chana was 10.16 mt for 2016-17 compared to an annual demand of around 9 mt.

Till November 9, there has been 43 per cent increase in the acreage. As a result, the government expects chana output at 9.75 mt in 2017-18.

Restricted imports

India buys 85 per cent of its total import requirements from Australia beginning post Diwali until February. A dry and hot winter, consecutive frosts, and delayed rains of 2017 impacted the chana yield in Australia to the extent that it is struggling to cross 1 mt of production level, down 55 per cent over 2016. A well supplied domestic market, reduced chickpea supply from Australia and imports restriction are likely to arrest any correction in chana prices.

India imports around 2-2.5 mt of yellow peas which roughly accounts for 45 per cent of its total pulses import. The government has imposed an import duty of 50 per cent on yellow peas which usually costs one-third of chana. The costlier imported peas may strengthen the demand for chana offsetting any price fall due to better crop outlook.

The government’s move to end the pulses export ban will provide limited support to prices due to the availability of cheaper supplies from Africa and Myanmar, though freeing export will benefit pulses in the longer term.

The support price (MSP) of chana has been increased by 10 per cent to ₹4,400/quintal inclusive of a bonus of ₹150/quintal. The other support measures, such as restricted imports and opening up of export of tur, urad and moong, though a bit late for kharif pulses, have restricted the slide in chana prices.


The forecast of chana production is good for 2017-18, but it will be too early to conclude anything as the sowing has just started. The rainfall and cold weather distribution throughout the production cycle, which are crucial for chana, may mar the production prospects.

On the other hand, in the event of a colder winter free of frost, sufficient soil moisture and adequate rainfall, the anticipation of good crop yield may lead to sharp price correction from the support levels at ₹4,600-4,800.

To sum up, the expectation of continuing government support may provide some boost to prices further. However, any rally seems unlikely in chana due to better supply prospects. At the same time, prices may not witness any major correction unless a favourable climate brings better yield than expected.

The removal of export ban will also cap price correction. If the prices hold at current levels, then a gain of 10-15 per cent can be witnessed in the short term.

The writer is vice president and head of agriculture, food, and retail at Biznomics Consulting

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