Thursday, December 12, 2013

India's exploitative horticultural supply chain

India Together carries this article analyzing the reasons behind sudden rise and fall in prices of vegetables taking onion as an example. A typical 'price spike' episode is shown in the graphic below.

The article argues the following: 

  • The per capita production of the basic vegetables of mass consumption - potato, tomato and onion - is showing a healthy increase over the decade. So it is not the case that production is not keeping pace with demand in the longer term.
  • Analysis of a price spike episode shows that while weather did affect production for a part of the year in some area, the overall production that year was adequate to meet local and foreign demand.
  • It appears that weather related events are not the cause but merely the excuse for pushing up prices.
  • Farmers, mostly with small holdings, have little ability to store their crops to get higher prices
  • The ability to hoard vegetables and sell at higher prices is entirely with the middlemen - wholesale traders and commission agents - of the mandis. While middlemen make a killing when prices spike, the farmers are at the receiving end when prices subsequently fall, as they must.
  • The laws governing agricultural marketing and the middlemen-state nexus in the management of the mandis ensure that middlemen can dictate prices to both the farmer and the consumer.
  • The hold of the middlemen goes beyond the confines of the mandis and extends to credit linkages with farmers, sub-wholesalers and retailers.
  • The entry of corporate retail - Reliance, Mittals, etc - has not changed this state of affairs. Corporate retailers have not been able to break the hold of middlemen on farmers and meet most of their requirements of vegetables from wholesale traders rather than from farmers.

National Horticulture Board for price and production statistics

1 comment:

Kannan said...

C. Balachandran
Dec 21 at 11:45 PM
Dear Kasturi Kannan,

Your article in India Together was enlightening and well written. Thanks for compiling the statistics that's much needed.
Such articles always help people like us (who run organic shop in Mysore) to explain to the customers in an informed way.....

Do drop in @ Mysore sometime....