Here’s why vegetable prices are soaring 4-fold in cities like Mumbai

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The rain gods may have blessed India with a good harvest but Mumbaikars are still reeling under an artificial price hike,  while middlemen and vendors, who have become monopoly buyers of agricultural produce, take advantage of the supply shortage.

Media reports say vegetable prices have seen a four-fold increase in the last three months and this is only going to get worse as retailers cash in on  ’damaged crops’ and spoilage due to the monsoon. It isn’t uncommon for the prices of vegetables to register a steep rise due to  the rain, but what is alarming is the extent of increase in the prices of almost all vegetables.

Farms near the Yamuna are flooded while dry weather in western India has hit output, which has crippled supply to several states, resulting in a 50 percent hike in vegetable prices. But agriculture experts say  losses  only occur occur in cauliflower since farmers sell the vegetable complete with stalks and leaves, which are then removed.

But hoarding and profiteering by retailers has resulted in the three basic vegetables used in almost all Indian homes— tomato, onion and potato— seeing a 50 percent hike in prices.

For instance, tomatoes in Mumbai now cost up to Rs 50 a kg, up from Rs 20 three months ago, while brinjal now is available at Rs 50 a kg. Even basics like ginger now cost Rs 40 for just 200 grams and prices of bottle gourd, bitter gourd, ridge gourd (tori), round gourd (tinda) and cucumber have risen over 50%.  Cauliflower, cluster beans, lady finger and capsicum cost Rs 80 per kg, well over the normal average of around Rs 40.

The common man is being forced to revisit his budget as what would ordinarily bring him one killo is now not fetching more than 250 grams.
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There are concerns that the rising food prices will put further pressure on food inflation. In May, across India, vegetable inflation stood at 9.78 percent and fruit at 6.01 percent against 5.43 and 8 percent, respectively in April. Madan Sabnavis, an economist with Care Ratings,  however believes the impact on inflation will be limited for now but it could become a bigger concern if heavy rains continue. While a good monsoon is good news for farmers,this year, the rainfall has been heavier than usual, raising the risk of flooding and crop damage.

However, despite the risk of flooding, experts say the difference between wholesale and retail prices should not be more than Rs 3-4 per kilo.

The current prices are a clear sign of profiteering as retailers have multiplied wholesale price rates at least four times. According to this MoneyLife report,  the prime reason for this daylight robbery is the Agricultural and Produce Market Committee (APMC Act) that prevents farmers from selling their produce directly to retailers or the consumer. The farmers can only sell their produce in government-mandated markets (mandis) to licensed middlemen. This also means, it is both the farmer and consumer who continue to be looted by the middlemen.

Citing a Goldman Sachs report, the article said, “Unorganised nature of the distribution chain makes for multiple layers of inefficiency and rent seeking. At each stage, there is some loss of produce due to multiple hands the product goes through and inadequate infrastructure.”

Hoping to ease the burden of the common man, the Maharashtra state marketing federation will start 10 vegetable centres in Mumbai next week, where vegetables will sold at a 30 percent cheaper rate.
The Maharashtra government aims to increase the number of such centres to 100 soon.
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“Retail vegetable sellers fleece consumers on the pretext of decline in vegetable production due to drought, ” Agriculture Minister Radhakrishna Vikhe Patil said yesterday, adding that the new scheme would help consumers get vegetables at much cheaper rates.

According to a Times of India report, of the 10 outlets, seven would be at Apna Bazar stores at Andheri, Ghatkopar, Sion and Dadar, among other places; the other three will be at stores of the Sahakari Bhandar and Supari Baug.

The stocks would be procured by the Agriculture Mahasangh, a body of wholesale traders. They will be cleaned, graded, packed and transported to outlets of the co-operative stores which are members of the state-run Maharashtra State Consumer Federation.

Given that the government does provide any storage facilities or take back spoiled vegetables, a sack of bad stock will just remain unsold through the day.

The TOI report quotes a store manager as saying, ‘The appointed suppliers provide fresh, good-quality produce for the first day or two until the photo-ops are over. On the third or fourth day, co-operative stores become a dumping ground for vegetables that no consumer will touch. Moreover, the rate remain unchanged.
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The Maharashtra government’s plan isn’t too different from what Jayalalithaa started in Tamil Nadu where the state government was procuring vegetables and selling it directly to consumers. While Tamil Nadu’s stores have been a success, it remains to be seen if Maharashtra can achieve the same result.

Source: http://to.ly/mfMZ