India is the biggest producer, consumer and importer of black matpe (our very own urad!) in the world. With a shift in domestic production pattern, causing a further shortage of black matpe in the domestic market, India has lately been importing it in increasing volumes from Myanmar. And not to say importers of this legume are in a sweet spot with a sharp rise in wholesale prices.

Indranil Das | November 2015 Issue | The Dollar Business

While eating out lately if you have found that the cost of your favourite ‘Dal Makhani’ has suddenly gone through the roof, don’t blame the restaurant. The wholesale price of the main ingredient, black matpe or urad dal, has increased by over 50% between September and October 2015. The retail price, as reported by the Ministry of Agriculture, has reached an all time high and ranges between Rs.130-170 per kg across various states (with highest price being quoted in Karanataka). With the festive season around the corner, you can expect prices to go further north. Market sources say that this spurt in prices is partially due to stockists and retailers buying stock to meet the market demand. There is no cause for despair though, the new crop should hit the markets in November and quench your craving without pinching your purse.

The 'Pulse' of India

In India, across regions, black matpe or urad is consumed in a variety of different ways, from the quintessential ‘sambar’ in South India to the delicate and comforting ‘biulir dal’ in West Bengal. This small-sized pulse is pretty versatile and is consumed in multiple forms, split, boiled, roasted or ground to make flour, and is a rich source of proteins, carbohydrates, phosphoric acid and calcium. Pulses are the main source of protein for a very large number of people in the India – each 100 grams contains about 32 grams of proteins.

India is the largest producer of this crop, and interestingly enough is also the largest importer and largest consumer. The other major consuming and importing countries of urad are China, Pakistan, Thailand and Japan. This year specifically due to a deficient monsoon as well as unseasonal rains and hailstorms, the production of pulses as a whole has fallen to 17.38 million tonne (MMT) as against 19.25 MMT in 2013-14 crop year. Naturally, prices have risen for pulses across the board and black matpe in particular. The shortage was so severe that the government had to float a tender for import of 5,000 tonne of urad dal to fill the fast rising supply demand gap. 

The production of urad in India is around 1.5 to 1.7 MMT annually and contributes to about 10% of the total pulses production in India. Madhya Pradesh is the largest producer of this crop in the country followed by Andhra Pradesh. Consumption of black matpe though higher in the southern states of India, is also significant in the North and the East. Urad is also traded at the National Commodity & Derivatives Exchange, the Multi Commodity Exchange of India and the National Multi Commodity Exchange of India.

Researchs suggest that the consumption level of urad has declined over the years, but gross consumption has steadily remained above gross production figures, and India has been importing increasing amounts of the pulses over the last decade. Between FY2006 and FY2015 our import of black matpe has grown 15 fold in terms of dollar value.

To The Rescue

Urad is grown mostly in Asian countries as the tropical climate suits the cultivation of this pulses, and is a prized trade commodity in many Asian countries. Myanmar, not a country that comes to mind when we think of foreign trade, is by far the largest exporter of this black legume with a share of 58% of the total worldwide exports, by value. China for a change comes 2nd with an export market share of 19% followed by Indonesia at a distant third. Specific to India, we import about 84% of our total urad imports from Myanmar. India’s loss in this case is Myanmar’s gain, and if you follow the shipping data at the port of Chennai, you will see enormous quantities of black matpe arriving at the port from Yangon Port (Myanmar) every day. In fact, Chennai port accounts for about 78% of total urad import into India, and almost all of it is from Myanmar.

The India-Myanmar beans and pulses trade has strong historical roots. The trade started when both countries were British colonies, and the British brought over pulses seeds, as well as growers, from India to specifically grow pulses that could be exported back to India. With both countries gaining independence from British rule in the late 1940s, many of the Indian growers went back to their country, but the trade continued to flourish. Myanmar has been long reliant on its beans and pulses industry for economic growth. Between 1962 and 1988, when General Ne Win was in power, all of the trade, especially for black matpe, was handled directly by the government. The situation was so severe, and the importance of black matpe so great for the economy of Myanmar, that some private pulses traders were even given capital punishment for their involvement in the black matpe market.

Myanmar produces over 20 varieties of beans and pulses and, because of relatively low national consumption, many of these varieties are export-only commodities. The main bean and pulses varieties produced in Myanmar are matpe, green mung bean and pigeon peas, with matpe production being over two times that of the next highest, green mung. A United State Department of Agriculture grain and feed report from earlier this year said Myanmar’s beans and pulses production should rise to 5.1 million tonne in 2015 and 5.3 million tonne in 2016 due to an expansion in growing area. By value, matpe contributes to about 60% of the total export of pulses from Myanmar. Myanmar traders rue that despite being the largest exporter of black matpe they remain price takers from India because of India’s monopolistic market position in this crop.

The government has recently floated a tender for import of 5,000 tonne of urad dal to fill the fast rising supply-demand gap.

Need A Helping Hand

With Myanmar trying to reduce dependence on India as an importer and India’s increasing levels of imports, it is important for India to take policy initiatives to increase production in the long run and ease imports for the short term.

To reign in prices and deal with the shortfall in production, India today has an effective import duty rate of 0% on black matpe as against a tariff rate of 30%. The exports of all pulses have been banned from India since 2006 and due to domestic shortages. The only exports allowed in pulses are that of organic lentils and pulses and of kabuli chana.

Minimum support price (MSP) for black matpe has also increased from Rs.3,300 per quintal in FY2012 to Rs.4,425 per quintal in FY2016, over and above which a bonus of Rs.200 is payable per quintal. Despite the increase in MSP the average annual growth area under cultivation has gone down by 0.6%, while the average production has gone up by 3.3% and average yield has grown by 3.5% between FY2009 and FY2014, according to the Ministry of Agriculture data. The growth in average yield has been extremely unsatisfactory, and there is a need for more research and development support from the government to increase the yield through the use of technology in both seeds and cultivation. The cost of production (including transportation, marketing and insurance) in the meantime has increased by a whopping 91% from Rs.2,257 per quintal in FY2010 to Rs.4,317 per quintal in FY2015.

While the difference between the cost of production and the MSP doesn’t make black matpe a very profitable crop, the present wholesale price has been hovering between Rs.8,000 and Rs.1,100 per MT for different qualities of urad, which should make the growers happy. Additionally, it was announced in September that urad would have a sowing area of 27.68 lakh hectares, as compared to last year’s 25.25 lakh hectares, which is expected to boost production.

Making Hay

All these measures together should make India self-sufficient to produce at the very least enough black matpe to fulfil domestic consumption and hopefully in some years become an exporter of significance. But that seems to be several years (perhaps decades) into the future. In the meantime importers of black matpe, with their price maker or giver status, are happily importing to meet the domestic demand. Over the last decade our import of black matpe has grown 15 fold, in terms of dollar value, from $39.07 million in FY2006 to $596.77 million in FY2015. Although the average per unit import price have also risen from $521 per MT in FY2006 to $957.54 per MT in FY2015, hitting a high of $1,162.92 per MT in FY2011, the wholesale prices in the domestic market have matched the pace. A conservative calculation shows that importers of black matpe of the FAQ (Fair to Average Quality) variety from Myanmar have a margin of 3.5%, which given the volume of trade is a very attractive position to be in. Consumers may be unhappy about the high retail prices of urad, but they have no option but to depend on imports. Otherwise one fine day the ‘sambar’ in your bowl will taste different and ‘dal makhani’ will do a vanishing act.