Buried in recent monthly data for wholesale prices in India,
the wild
gyrations of a humble vegetable tell the tale of an
economy trapped in
inflation by its own rigidities. In street
markets and on the handcarts of
vegetable hawkers, the rise
has been even steeper, a shock for millions of
Indians
who lay their tables each day with curries made of onions, tomatoes,
lentils and "aloo", or potatoes.
"We used to
buy whatever vegetables we liked, but now we always have
to check the
prices," says Maninder Kaur, shopping with her family at a
market in
Jalandhar, in Punjab, where a kilogramme (2.2 lb) of potatoes
that cost 4-5
rupees (8-10 U.S. cents) at the beginning of the year is now
up to four times
more expensive.
the end of last
year and the price of tomatoes rose 33 percent in April alone.
Such erratic
prices for perishable goods are routine in India, partly because
the majority
of farms depend on the variable monsoon for rains. However,
they
are also due to inadequate cold storage facilities and transport bottlenecks -
that together cause up to 40 percent of the country's food harvests to rot
before
they get to market - and a primitive distribution network in which many
layers
of middlemen take cuts, forcing prices higher.
"The
storage and the distribution networks are not getting better, so whenever
there
is even a small supply shock or a small demand shock prices are going
haywire," said Samiran Chakraborty, chief economist at Standard Chartered
in Mumbai.
supply-side reforms."
MANY MIDDLEMEN
which for
agricultural goods is deeply fragmented by a decades-old marketing act
that
prevents large retailing companies from buying produce directly from farmers.
government was
forced into a U-turn on plans to open up the retail sector to
global chains
like Wal-Mart (WMT.N)
and Carrefour (CARR.PA).
"The
current marketing system has been in existence for more than 60 years,
neither
benefitting the farmer nor the consumer," said N.R. Bhanumurthy, an
economist at the National
Institute of Public Finance and Policy, a Delhi-based think tank.
can buy
directly from the farmers and eliminate the middlemen," he said.
and
then to the final vendor like a hot potato, climbing in price at every stage.
of the crop
from farmers at the end of last year for 3,500-4,000 rupees a tonne
and put
their purchases in storage.
Then, in the new
year, as supplies tightened, they drip-fed wholesale markets, auctioning
their
stock off at 7,000-8,000 rupees per tonne, a mark-up of more than 60 percent
after
their transport and storage costs.
4 percent in auction tax. The auction buyers sell for a 20-30 percent
profit to intermediate
wholesalers, who take a similar cut and pass the
potatoes on to final vendors in the
streets and neighbourhood shops.
At the end of
the chain, potatoes that were sold at the farm gate for 3-4 rupees per kg
reach
the market at 15-20 rupees. The story is the same for many farm products.
Neeraj Kumar, a commission agent in Jalandhar town, says garlic bought some
2,500 km (1,500 miles) away in Assam at 3-4 rupees/kg can soar to 30 rupees
within
hours of being unloaded.
On the potato
fields outside Jalandhar, the mood is despondent. Farmers are bitter
that they
were forced to sell their produce to traders at rock-bottom prices.
us to
leave the harvest in fields. This time, we sold it early to traders, but now
the prices have gone up three-fold," says farmer Avtar Singh. "It is
my fate. We do
not know when prices are going to go up or fall."
(Writing by John
Chalmers; Editing by Robert Birsel)
the wild gyrations of a humble vegetable tell the tale of an
economy trapped in inflation by its own rigidities. In street
markets and on the handcarts of vegetable hawkers, the rise
has been even steeper, a shock for millions of Indians
who lay their tables each day with curries made of onions, tomatoes,
lentils and "aloo", or potatoes.
to check the prices," says Maninder Kaur, shopping with her family at a
market in Jalandhar, in Punjab, where a kilogramme (2.2 lb) of potatoes
that cost 4-5 rupees (8-10 U.S. cents) at the beginning of the year is now
up to four times more expensive.
the end of last year and the price of tomatoes rose 33 percent in April alone.
the majority of farms depend on the variable monsoon for rains. However,
they are also due to inadequate cold storage facilities and transport bottlenecks -
that together cause up to 40 percent of the country's food harvests to rot before
they get to market - and a primitive distribution network in which many layers
of middlemen take cuts, forcing prices higher.
there is even a small supply shock or a small demand shock prices are going
haywire," said Samiran Chakraborty, chief economist at Standard Chartered in Mumbai.
supply-side reforms."
which for agricultural goods is deeply fragmented by a decades-old marketing act
that prevents large retailing companies from buying produce directly from farmers.
government was forced into a U-turn on plans to open up the retail sector to
global chains like Wal-Mart (WMT.N) and Carrefour (CARR.PA).
neither benefitting the farmer nor the consumer," said N.R. Bhanumurthy, an
economist at the National Institute of Public Finance and Policy, a Delhi-based think tank.
can buy directly from the farmers and eliminate the middlemen," he said.
and then to the final vendor like a hot potato, climbing in price at every stage.
of the crop from farmers at the end of last year for 3,500-4,000 rupees a tonne
and put their purchases in storage.
their stock off at 7,000-8,000 rupees per tonne, a mark-up of more than 60 percent after
their transport and storage costs.
4 percent in auction tax. The auction buyers sell for a 20-30 percent profit to intermediate
wholesalers, who take a similar cut and pass the potatoes on to final vendors in the
streets and neighbourhood shops.
reach the market at 15-20 rupees. The story is the same for many farm products.
Neeraj Kumar, a commission agent in Jalandhar town, says garlic bought some
2,500 km (1,500 miles) away in Assam at 3-4 rupees/kg can soar to 30 rupees within
hours of being unloaded.
that they were forced to sell their produce to traders at rock-bottom prices.
us to leave the harvest in fields. This time, we sold it early to traders, but now
the prices have gone up three-fold," says farmer Avtar Singh. "It is my fate. We do
not know when prices are going to go up or fall."
23 comments:
completely agreeing with the above article , Even if the govt stores the extra produce ,it is never able to utilize the buffer stock to its full extent and let it go to waste.So proper utilization is also a major concern.
even if use the buffer stock to its full extent then also we lack in supply chain to such an extent that by the time it reaches the general public cereals and other fodder is degraded to 50% of its quality . the solution given in the article to remove the middleman can be very useful in this case . the buffer stocks and the cold stores can be privatized and in order to benefit themselves and for staying in market they will compete with each other and in this process they will provide an easy and cheap excess of food grains and vegetables to general public and this will help in maximum utilisation of our buffer stock and the farmers will also have different option and can sell their goods to ones who give better value to their hardwork .by this way the market price of vegetables and crops will also come to a reasonable rate
Dear Shewangee and Toshit...Appreciate your comments.
The real issue is, for a large country like India, large, centralized markets are a definite no no. The moment we have centralization and momentum for large markets, we encourage middlemen, concentration of economic power, technical and man-made bottlenecks. In fact when bottlenecks increase there is benefit from corruption. This further spreads to wrong policies and politics.
We must go with the Gandhian way of decentralization and movement towards rural areas. Europe is a good example where there are a network of markets which work for the benefit of society.
I invite more ideas from you all to reduce theses bottlenecks. ultimately, we should be able to provide a good life to all Indians.
I agree to the point mentioned that the middlemen should be removed as due to which the cost of the final product would increase. The government should have one specific global chain which would buy vegetables directly from the farmers and sell to the costumers. This would uplift the farmers as well as benefit the consumers. Reliance Group started a chain Reliance Fresh which sold vegetables at a lower rate than the vendors selling outside. That was opposed by the vendors as their livelihood was at stake but there should be awareness among the people how much this is useful and due to the removal of middlemen the goods aren't destroyed as they are directly transported . There should be global chains and should be encouraged.
i agree with point that we remove the middlemen and due to this goods are not perished or rates of goods are not increased. But there is a problem in the idea that the retailer bought the vegetables directly from the farmers is that the all burden of buying and selling in a very short time is lay upon retailer. For that they have to go to each farmer, do transaction, and then sell all fresh vegetables to consumer.
As said by someone doing privatization in this is also help as the condition of competition is created and every type of competition is good for market.
i agree to the point that we removed the middleman we safe the costs of transportation, storage and profit making by chain of middleman.farmers and consuemers both benefited.farmers gets right price for their goods and consumer gets goods in low price.
Sir, according to me the idea of foreign multinationals like walmart, TESCO ,carrefor would be a better alterantive because this will remove the middle man scheme. These multinationals have their own treansportations and distribution system and this would not directly affect the price of veges. as the present system does and will create a freeway insted of a bottleneck. And that is why govt. is trying continiously to introduce it in india.As far as it is connected to farmers ,the farmers will sell the vegetables directly to them at a sober price under the vigil of govt.
OR
what we can do is make our own distribution system like wallmart and TESCO. only for vegetables and fruits so that we coud make an ORGANISED MARKED and could act more rationally and with a STABLE PRICE.
STOCKING is a great problem and should be controlled by the govt. because what vendors do is they take vegitables from farmers and make a stock of it and after that they sell them at a higher price.This same case happened with the onions in indiaand thatswhy their prices rised.
Prateek Shrivastava
15BBL048
Sir,in order to get rid of middleman government should provide medium which enable all farmer to directly intervene in the market.Also the government should encouraged to make more cold storage and more important the government should regulate the price of the goods which are being cold stored and than further send to market.
totally agree with the article- " inadequate cold storage facilities and transport bottlenecks that leads to 40 percent of the country's food harvests to rot before
they get to market " solution is itself given in the article that we need to improve distribution system and the role of middleman should be cut down so that retailer can buy directly from farmer. we are talking about the most highly perishable food items so the time between when they are plucked from the field and brought into the market should not be more than a few weeks.
Sir,
agree to the article as the bottleneck in the sale process of any product ,specifically when we talks about agricultural products the role of middleman is crucial as given in the article that we have laws that prevents the farmer from supplying goods to the large retailing companies , which i think is a major setback as when we see the statistics when these middleman's role comes into existence the price of a commodity just rise like anything but if it comes to these big retailers the margin of profit could be lessened and the price of goods could be brought down . for instance if we take the example of the electric goods, earlier these were limited upto the shops and usually shopkeepers make a good profit out of it , but when the big retailers like flipkart , snapdeal have come to the business the price of goods have been substantially gone down as the profit of the middleman which is beared by us reduces , actually it may happen that the situation may lead to equillibrium state if not exactly but near to it . Other aspect is about the goods that gets rotten , for that i think govt. should introduce the cold storage facility for the farmers itself as stated the middleman makes a huge profit , whereas the one who is actually involved in the process get nothing {farmers}. these storage can be used by them to store and provide them when there is a supply shortage . that will make the supplier as well the buyers happy and satisfied.
utkarsh jai {15bal028}
This article covers all the aspects of the discrepancies in the system as we see in the case of potato what actually happens is that at the time when new crop comes these middleman buy the potato from farmers and farmers sell them due to the lack of storage facilities and also because they are unable to bear the extra storage expenses .And taking advantage of the situation middlemen sell them at a higher price later.One of the important aspect is the lack of awareness among farmers.At times they are not aware about the actual conditions of the market and they are being misrepresented with the actual price of their commodities.
utkarsh i don't agree to your point that "when big retailers like flipkart ,snapdeal have come to the business the price of goods have been substantially gone down" .. actually these shopping companies act as an another middle-man in this process and in some cases prize do no decrease they remain the same .
The dispute highlighted in the above article is that the prices of of the agricultural products rise because of our archaic marketing system . As it is written that the marketing system has'nt changed in 60 years. i would say that that the middle man who raise the price of the products according to their wish or who store the products and sell them when the supply is tight own their own rates should be checked . till now these middle man would not have been removed because our marketing system sometimes does not allow these retailing companies to reach farmers. i think that the present marketing system should be changed . the marketing system is obsolete according to the present scenario. the market situations 60 years back were different . also the farmers should be made aware of the market because they believe whatever is been told to them by the middle man. and the problem of shortage of cold storage should be checked, new cold storage should be made in order to avoid the rotting of our agricultural goods.some new concepts to remove the middle man should be introduced like we can see in the online shopping model concept, the prices of the goods which we buy are comparatively lower than the prices in the market because of the absence of the middle man. so something of this sort can be introduced inorder to make the farmers happy and the consumer happy.
Sir,
I agree with the above article that the middlemen should be thrown out of the market scene because of them the cost of agricultural good is increased day by day due to which many farmers face a lot of problem. The farmers do not get fair price of their good because of middleman. The farmers do not have proper storage facility(like warehouse) to store their good and hence they are dependent on such middlemen. Hence these middleman exploit them by not giving them fair price. We, the consumer are also affected by these activity as we have to pay high prices for these goods. Because of middlemen, both farmers and consumer get affected. We should encourage online shopping which may help in eradicate the middleman system by which farmer or a manufacture get fair price of their good which will beneficail for both.
ALRIC TIRKEY
15BAL147
The article is very much relevant. The main problem is that the middlemen are soaking up the hardwork of the farmers and are unnecessarily making money out of the them. It is not possible to remove middlemen completely but what can be done is that fixing maximum amount that the middlemen can charge on the produce. This will be fair enough for the farmers.
Sir,
I agree with the above article that the middlemen should be thrown out of the market scene because of them the cost of agricultural good is increased day by day due to which many farmers face a lot of problem. The farmers do not get fair price of their good because of middleman. The farmers do not have proper storage facility(like warehouse) to store their good and hence they are dependent on such middlemen. Hence these middleman exploit them by not giving them fair price. We, the consumer are also affected by these activity as we have to pay high prices for these goods. Because of middlemen, both farmers and consumer get affected. We should encourage online shopping which may help in eradicate the middleman system by which farmer or a manufacture get fair price of their good which will beneficail for both.
ALRIC TIRKEY
15BAL147
The article is very much relevant. The main problem is that the middlemen are soaking up the hardwork of the farmers and are unnecessarily making money out of the them. It is not possible to remove middlemen completely but what can be done is that fixing maximum amount that the middlemen can charge on the produce. This will be fair enough for the farmers.
The article very much reflects the situation that has gripped the market. Farmers find themselves in a position in which they are, in every sense of the word, 'helpless'. If the farmers choose to avoid the middlemen and think of storing their goods in cold storages, they are helpless as there are inadequate cold storage facilities and transport bottlenecks. On the other hand, if they depend on the middlemen, as said, they bear
the pain of their goods being sold at a price double than that at which they were bought from them.
Not only the farmers, these acts of the profit-making middlemen also, in a way, affect us, the consumers. The price at which we buy these agricultural goods is easily triple or four times the price that the farmers were paid for growing them.
Of the many steps that the government ought to take to bring the situation under control, two I'd wish to state. First that the existence of such profit-oriented middlemen who hamper the smooth process of the market should be completely wiped out. Other that, to entrust the farmers with more instruments with which they can be prepared to be more independent. Aid and assistance, including facilities of cold storages and silos, should comprehensively be made available to the farmers in order to empower them.
Sir,
In my view it's the responsibility of the government to intervene and take control over the intermediaries not completely but to the extent that they cannot exploit the prices of these perishable goods on there own will because at the end of the day people at the higher income level would still be able to buy , but people at the lower level would suffer which calls for the intercession by the government to serve the interest of this group. Moreover, the government should also take some action against the high level wastage of these perishable goods because in a country like India still a large number of people sleep bare stomach every night just because they are not able to coordinate with the perpetually hiking prices. Abroad and in the U.S., waste operators and big food retailers have been using anaerobic digesters, giant sealed containers where bacteria breaks food waste down into biogas, a renewable energy source that comes from organic material fermenting without oxygen, to make energy from compostable food. Also refrigerators could be used to store these farm products as pointed out in the article.
SONAKSHI JAIN
15BBL019
Now thats what I call the 'AHA' moment.
Each comment is a thought process and an idea. Some of you hold the Government responsible and others have stated a list of solutions. Can we develop this further and create an article for a national or international Journal?
The Contributors for the post are budding Economists and Lawyers..Good job guys..
Sonakshi, Adimesh, Mahima, Alric, Aditya, Sumit, Prafull, Utkarsh, Pratik, Praveer,Nitya, Aditi, Anushka, Shewangee and Toshit...
Impressed by the analysis and brevity in expression of ideas.
Keep the flag flying high and do share anything that comes to your mind.
Feeling Enriched..
Warm Regards,
Arun
This article clearly mentions about the atrocities everyone faces due to rise in prices.The solution to this problem is the removal of middlemen which will to a great extent help in reduction of prices...bt it is easy said than done..it's not an easy task to remove middlemen.Therefore..governmnt need to educate farmers and provide them with all facilities...Then only situation will change.
SALONI SHARMA
15BAL053
every coin have two faces. i agree that removal of middleman will help in reduction of prices but the amount of grains i mean in quantity we are getting now will decrease because many of the villages are in so remote places that farmer on his own can not take his crops to market directly. middle man are taking extra charges but some how they are helping those farmers too who all are not able to supply directly. This will increase burden on farmers too they have to bear the transportation charges but in the end farmers will be in profit. but the condition of farmers are not that much economically sound , first they have to bear the initial expenses then they can expect the profit but the sad part is farmers can't afford the initial investment (here i am talking about the very poor ones).
DEEPANSH TRIPATHI
15BAL148
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