Supply permits from Bengal sell at big premiums in grey market

The West Bengal government’s decision to impose a quota on supply to neighbouring states has enabled a grey market for the permits issued by it.

The price of one token, which allows 16 tonnes of supply outside, sells in the grey market for Rs 1 lakh. The government has capped the daily supply to elsewhere at 1,100 tonnes a day, provided traders also sell at Rs 12 a kg through ration shops at home.                                                                        

West Bengal is the second largest producer of potato after Uttar Pradesh and normally caters to the entire eastern market. With its restrictions, prices have surged elsewhere and the eastern markets are now being served by supply from UP and Punjab. Against the daily shipment cap of 1,100 tonnes, the requirement for Odisha alone is 5,000 tonnes a day. As a result, prices of potato there have risen to Rs 35 a kg.

“In Medinipur, which borders Odisha, the demand for tokens are high, pushing the price as high as Rs 1 lakh each. In other districts which send potatoes to Bihar and Jharkhand, the price of tokens is as high as Rs 50,000 each,” said a trader.

However, supply of tokens is also limited. Also, “the traders who have got the tokens are incurring losses by selling potatoes at Rs 12 a kg to the state government. To cover these loses, they are auctioning the tokens,” said another trader.

On August 25, the Bengal government had announced capping of the daily supply to other states at 700 tonnes. In lieu, the traders were asked to sell 300 tonnes a day to ration shops at Rs 12 a kg. However, with traders protesting the decision by way of a strike, the government diluted the norms this month. Exporters allege even with the price tag for each token, those supplying Odisha are able to make a profit of Rs 20,000-25,000 on each 16-tonne consignment.

Potato prices are high this year on account of a nearly 20 per cent shortage in output. Traders say production in UP is down by 10-20 per cent and that in Bengal by 20 per cent. The two states account for nearly 60 per cent of the country's production. In Bihar, third largest producer, production is down by 10 per cent.

Every year, West Bengal sends nearly six million tonnes of potato, nearly 60 per cent of its production, to Bihar, Jharkhand, Odisha, Andhra and Assam.