Though some of the traders said that the effect of Andhra Pradesh government's move to ban inter-state movement of chillies for 10 days starting Saturday is being felt and chilly prices have started declining.

According to Ashok Dattani, a leading chilly trader at the APMC in New Mumbai, the extraordinary price-rise was due to the peaked Diwali demand combined with the demand from Bangladesh against lower supplies. Arrival of the new crop began late in in February 1998 as against normal arrivals which generally begin in January. Moreover, the crop was also lower by 40 per cent at approximately 90 lakh bags, of 30 kilogram each, against last year's 135 lakh bags.

Some speculators started hoarding as arrivals began at a high price of Rs 40-45 per kg expecting to cash in on the prospectiveshortage and further fuelled the spiralling of prices.