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Be ready to face more upward movement in prices during the festive season
Consumers may feel the pinch of rising food prices in the upcoming festive season, as shortage of rainfall has adversely affected crops, whereas there is likely to be high demand.

PRICES OF essential commodities such as sugar, edible oil, milk and its products may see a sharp rise at the retail level in the ensuing festive season as per the forecasts made by a study carried out by the industry body Assocham.

In 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. Traditionally, India's economy witnesses a busy season with the onset of festivals mainly Diwali and Durga Puja, and then Christmas towards the end of calendar year.

"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 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 study says that 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 D S Rawat, Secretary General, Assocham in a statement.

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 the Assocham Research report, the prices of groundnut oil and mustard seed oil have gone up by 25% in the last one year. The shortage of 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 toor 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 study.

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%.

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