Retailers keep potato prices up on high demand, costs

Demand is up due to a lot of substitution taking place in consumption basket of households as vegetable prices have increased sharply

Retailers kept potato prices up despite little volatility in the wholesale markets in the last month. A rise in demand due to substitution of costlier green, leafy vegetables with potato in the consumer basket was cited as a reason. The other were transportation and labour costs borne by the retailers.

While price in Delhi declined 35 per cent in the wholesale market to Rs 12.5 a kg on November 25 from Rs 19.4 a kg on November 1, retailers continued to sell it at Rs 28 a kg.

The West Bengal government’s decision to restrict supplies outside the state caused price decline in Kolkata to Rs 13 a kg, the lowest retail price in India. But, the move made potato costlier in Bihar where the price has shot up 50 per cent this month.

In Mumbai, potato is selling in the retail market at Rs 28-30 a kg (the food ministry quotes it at Rs 24 a kg), a wide margin from the wholesale price of Rs 18-20 a kg quoted in the Agricultural Produce Market Committee (APMC), Vashi, the sole market feeding potato to Mumbai.

“With no massive wastage in potato, unlike green and leafy vegetables, Rs 10 a kg higher retail price is unjustified. Potato should have been sold in the retail market with a nominal margin, given the transportation and labour cost over and above the wholesale price,” said R P Gupta, director, National Horticultural Research and Development Foundation (NHRDF). In most markets away from the mandis, the retailers bear the costs of transportation and labour.

Ashok Walunj, director (onions and potatoes) of APMC, Vashi, however, justifies a high margin.

“With high labour and transportation costs, the Rs 20 a kg potato becomes costlier Rs 5 a kg. Considering the high cost of infrastructure and margins, the retailers cannot sell below Rs 30 a kg. Hence, the Rs 8-10 a kg difference is normal.”

Madan Sabnavis, chief economist, CARE Ratings, looks at it as more a demand-supply mismatch, with some speculation and hoarding. “Demand is up due to a lot of substitution taking place. Add to this a shortage in supply, with crop in the south affected by rains. At this stage, speculators with holding power have blocked the transmission chain.”

While the government holds control on the wholesale markets, the retail ones remain out of control. Gupta had advised the government to come up with market intervention policies to be assigned to regional or national co-operatives. The proposal was rejected by Virendra Singh, chairman, National Co-operative Consumers’ Federation of India, under the food ministry. The body has 135 state co-operatives that run their own retail outlets. “We cannot intervene in the market with fixed retail prices without the government’s approval, as profit would remain with the co-operative while the loss would be borne by the government.”