Farmers don't get richer on pricier vegetables

The economics of the supply chain doesn't ensure increased gains for producers

“When we hear about the very high prices of onions, we wonder why we are not getting those prices. The retail price of onions had reached Rs 80 a kg in north Karnataka, but I couldn’t reap its benefits. The middlemen did,” says Bhimanna Dindalkoppa, a farmer from Uppinabetageri village in Dharwad district. He isn’t the only one. Ravindra Desai, a vegetable grower from Aminabhavi in Karnataka, says: “We have realised it’s only retailers who make money when vegetable prices rise.”

This sentiment is shared by farmers across the country. In recent months, as in the past, it has been seen vegetable prices in retail markets across the country are three-four times higher than what farmers get. And, negotiations don’t help much because of the perishable nature of vegetables; this forces farmers to enter into arrangements with middlemen to sell their produce and raise money quickly, owing to the dearth of adequate storage facilities. “Vegetable farmers are the most vulnerable. Even if prices soar to one of the highest levels, they only get a third or fourth of the prices in retail markets. Vegetables are a perishable commodity; therefore, retailers can’t take the risk of losses from leftover vegetables, which will be of no value after a few hours,” says Maganbhai Patel, secretary, Bhartiya Kisan Sangh.

LEFT OUT

• Middlemen, others in the supply chain pocket most of the gains
• Perishable nature and need for quick cash compel farmers to sell at low prices

For farmers, input costs have been rising and growers of most agricultural commodities say often, this doesn't allow them to wait for better prices. The prices of fertilisers, labour and electricity, as well as other expenses are escalating. Sources say agricultural input costs have increased an average 15-20 per cent through the past year. Labour costs saw a rise of 20 per cent in Gujarat, while diesel and power costs have seen single-digit rises. “Fertilisers and insecticides, too, have become costlier about five per cent in the past year. Also, there was an increase in iron prices, which led to increased costs of agro equipment,” says Maganbhai Patel, Pradesh secretary, Bhartiya Kisan Sangh.

V Murugananadham, a farmer from Coimbatore, which is known for its potato crop, says while his production cost rose from Rs 5-5.5 a kg last year to Rs 6-6.5, the selling price rose only 50-80 paise a kg to Rs 8-10 a kg. In retail markets, the commodity was sold at Rs 25-30 a kg. On a few occasions, prices rose to as much as Rs 80 a kg.

At urban retail markets, onions, tomato, cabbage and cauliflower are being sold for Rs 80-120 a kg, three-four times the prices farmers get. Shankar Patel, a vegetable farmer in central Gujarat, says, “When vegetable prices rise, we keep staring at the people making money from our produce.” Often, business realities force farmers to enter into an arrangement with middlemen. “If a farmer wants money for the crop in advance, he would be obliged to sell to a middleman at the price the latter wants. If the price goes up, the middleman might give a small percentage of the extra profit he makes through sales to the farmer, considering the relationship between them and the farmer’s bargaining power,” says Paramasivam A, a vegetable retailer in Koyambedu, Tamil Nadu.

Invariably, a large chunk of the profit goes to retailers. Ganpatbhai Ladhabhai, a member of Batata Utpadak Khedut Sangathan Samiti, an association of potato growers in north Gujarat, says, “It is the wholesale trader and subsequent buyers, including the retail vendor, who are the forces behind the rise in vegetable prices.”

Gurmeet Singh, a farmer from Punjab, says, “The margin for vegetables is very low compared to other cash crops. I am compelled to grow vegetables because I have land of less than half an acre. Had I been a big farmer, I would have preferred growing wheat or paddy.”

Some large companies enter into arrangements with farmers with buyback guarantees. PepsiCo, one of the largest procurers of processed potatoes in the country, works with about 24,000 framers across nine states. A company spokesperson said PepsiCo procured potatoes at pre-agreed prices that guaranteed assured incomes to farmers. “High inflation has generated cost pressures and this has also impacted PepsiCo. However, we are managing our costs by introducing efficiencies in procurement chains. Several studies show in India, post-harvest losses for fruit and vegetable supply chains stand at about 30 per cent. However, PepsiCo’s loss is about 16 per cent, and we are consistently working to reduce it further,” he said. Selling vegetables directly to organised retail chains helps, but only in states that have amended their respective Agricultural Produce Market Committee (APMC) Acts; many states haven't. And, for states that have, the scale of such purchases isn’t big enough to benefit most farmers. In some cases, organised retail stores such as Mother Dairy, Reliance Fresh and Big Bazaar prefer to procure vegetables directly from farmers, as is the case in Maharashtra. In such cases, the farmers get more than prices through the APMC, as these chains pick up commodities from farms, which reduces costs for farmers.

“But this amount remains much less than the actual retail price,” says R P Gupta, director, Nashik-based National Horticultural Research and Development Foundation.

Contributed by Gururaj Jamkhandi, Rutam Vora, Gireesh Babu, Vijay Chandra Roy & Sanjeeb Mukherjee