Hyderabad, TELANGANA — This time last year M Venkateswara Reddy was a busy man, procuring hundreds of thousands of bags of Guntur’s famous red chillies to export to markets across Asia. In good years, nearly half the red chillies consumed in India are sourced from Guntur.
This year Reddy is at home, working the phones as the Secretary of Guntur’s procurement yard to reassure hundreds of farmers and traders alarmed by the impact of the novel coronavirus on their livelihoods.
Guntur’s market yard has been shuttered by India’s coronavirus lockdown and the prices of high-grade chillies have fallen 25 percent. All procurement of chillies has stopped, Reddy said, exports are paralysed and domestic sales have crashed. The loading operations at port at Visakhapatnam have slowed to a crawl, and with migrant farm workers unable to travel across state lines because of the lockdown, much of the chilli crop is yet to be harvested.
Halfway through India’s 21 day lockdown, the crisis in Guntur’s chilli market offers a snapshot of an economic uncoupling last seen during demonetisation, when Prime Minister Narendra Modi crippled the economy by suddenly declaring high-value currency notes would no longer be legal tender. If the lockdown’s effect on the chilli crop is anything to go by, the disruption caused by the lockdown will take months to amend and, much like demonetisation, marginal farmers and small traders are likely to bear the brunt.
The fate of Guntur’s chilli crop is indicative of countless segments of India’s economy that are rarely noticed by policymakers or commented upon by the national media — but are likely to suffer in the current lockdown. The disruption in the chilli market is likely to ripple through to the region’s pickle producers, and will cause fluctuations in markets for chilli powder, flakes and blended markets.
“Most farmers who have not harvested in January and February are still waiting for labourers for harvest. That is more than half the produce in the state” Dr. A. S Rao, director of research in N G Ranga Agricultural University, Guntur told Huffpost India, adding that scores of labourers from Andhra Pradesh and neighbouring Telangana had migrated back to their states in the last week of March. The domestic farm labourers too have been forced to remain at home due to the curfew.
2019 was a good year for chilli farmers in Andhra Pradesh as the state could reduce the impact of Gemini, a produce affecting virus on chilli plants. With good quality produce hitting the market, the price of Guntur chillies was at a record high in January, 2020—Rs. 20,000 per quintal.
But as the prices first fell when coronavirus spread across China, and deepened as India went into lockdown.
For now, the storage units in the Guntur Chilli Market are only half full and market, Reddy the secretary said, has suffered losses of Rs 1,500 crores that are expected to rise to Rs 5000 by the end of the lockdown. Most of these losses, Reddy said, would be born by small farmers, small traders, and the daily wage labourers who work in the market’s yards.
“Chillies are not perishable and can be stored for over six months. As there is enough space in cold storages, big farmers who don’t have to sell their produce can store them here in Guntur for long,” Reddy said. “Big traders who have procured chillies too can hold on to the produce for the market to improve.”
Small farmers are likely to suffer. The shortage of labour will push up harvesting costs at a time when market prices have crashed. For small farmers, harvesting can account for upto 70 percent of the total cost of cultivation, said N. Hariprasad Rao, Principal Scientist at Horticulture Research Station in Guntur, Andhra Pradesh.
Rao said while the cost of cultivation is expected to increase because of delayed harvesting, further drop in prices are expected due to the same. Chilli prices are dependent on capsaicin and capsanthin, which respectively give pungency and colour to the crop.
“Delay in harvesting need not affect the pungency but it will affect the colour. The crop can fade in colour and become wrinkled. This will affect prices in the international market which will bring down prices in the local market,” Rao said.
Ripples From Guntur’s Chilli Market
It is hard to predict precisely how the fluctuations in Guntur’s chilli market will affect the markets for related products. On the one hand, the fluctuation in the market could lead to hoarding.
“About 50 per cent of red chillies are processed and powdered for sale in the domestic markets. Twenty per cent of exports too are in the form of flakes, powder and extracts.” explained an officer at the Andhra Pradesh Spices Board. “The prices of these end products will go up if hoarding happens. This impact will be felt in the domestic market only in the next six to eight months.”
Small industries including pickle manufacturing units will then have to bear higher costs of raw material, said C Ramachandraiah, economist at the Centre for Economics and Social Sciences.
Guntur is home to several pickle manufacturing units including the famous Priya Pickles.
When asked whether there could be an impact on the pickle prices due to possible hoarding of chillies, a spokesperson of Priya foods which makes Priya pickles, said, “Red chilli prices will affect the production cost of pickles. We, are however, hoping that the fluctuation will not be too high for us to handle”.
On the other hand, the state government could prevent hoarding and push the produce into the market, leading to a crash in prices — in which case, the region’s farmers will suffer.
“The last time chilli prices fell massively was in early 2000. Then the state had to subsidise and offer a minimum support price which was almost the same as the market price of chillies,” Hariprasad Rao said.