The value chain analysis of the triune of Indian cooking – tomato, onion and potato (TOP) – suggests that farmers are getting only around one-third of the price that a consumer pays, with the rest being apportioned by wholesalers and retailers, according to a RBI working paper series (WPS).
The farmers’ share in the consumer rupee is estimated at around 33 per cent for tomato, 36 per cent for onion, and 37 per cent for potato, per the paper.
value chain
“Marketing reforms, storage solutions, enhancing processing capacity, and raising yields through higher R&D investments in developing climate resistant varieties and innovative cultivation techniques would be critical for improving the value chains, increasing farmers’ share in consumer rupee and containing price volatility,” said the paper.
The authors of the paper include Ashok Gulati, distinguished professor at the Indian Council for Research on International Economic Relations, and RBI officials Suvendu Sarkar, Soumasree Tewari, Rohan Bansal and Shelja Bhatia, among others.
Tomato, onion and potato (TOP) are amongst the largest produced and consumed vegetables in India. The authors noted that they exhibit significant volatility in prices due to short seasonal crop cycles, perishability, and regional concentration of production as well as sensitivity of the crops to the evolving weather conditions.
Volatility in costs
These commodities, despite a combined weight of just 4.8 per cent in the CPI food and beverages group and 2.2 per cent in CPI combined (Base: 2012=100), contribute substantially to the variance of food and headline inflation.
“There are supply side factors which affect the price movement due to agro-climatic risk, drought or flood, level of minimum support prices (MSPs) and fluctuations in key input costs like oil and fertilisers. The demand side factors include rising per capita income, increase in monthly per capita expenditure, relative prices of a substitute or complementary good, etc.,” the authors said.
They observed that during the flush season, farmers are often seen discarding their crops or resorting to distress sale when prices drop way below their production costs. On the other hand, during the lean season, consumers are faced with higher prices.
This boom-and-bust cycle of TOP is due to the inefficient marketing system and lack of well-integrated value chains with a widening gap between what farmers receive and what consumers pay.
