Rohit Kumar Parmar [1]
1. Introduction
Sharp variations in the price of farm produce, are not good for players in the value chain, especially the farmer, and the economy. This author citing low capsicum price, has earlier argued that very low farm price is not good for the farmer, and the economy, especially in the long run. [2]
2. Price of tomatoes since June 4, 2023
Starting mid-June 2023, there has been an abnormal increase in the price of tomatoes and some other vegetables. Price of tomatoes (in Delhi) increased from a low of Rs. 20 on June 14, 2023 to Rs. 213 on August 3, 2023, by 10.65 times, i.e., 965 per cent. [3] Table 1 and Chart 1 give the increase/change in the price of tomatoes in Delhi. [4]
Prices of some other vegetables on August 3, 2023 - Capsicum (Rs. 145), French beans (Rs. 145), and Ginger (Rs. 299) were also on the higher side. [5]
The increase of tomato and other vegetable prices, starting mid-June 2023, is not seasonal, is sharper, has stayed for a longer duration, and has further increased food inflation and cost of living.
The sharp increase raises questions, answers to which are discussed in the following sections.
i. Could the government anticipate this increase?,
ii. The timing and adequacy of government intervention?.
3. Anticipation of increase in price of tomatoes
Disruption in supply of fresh farm produce, especially tomatoes and other vegetables, leads to an increase in prices. Disruption in supplies could be because of end of supply from one location, and before supply from the next location commences.
In order to anticipate any disruption, government has a mechanism to forecast crop output in the form of `Forecasting Agricultural output using Space, Agro meteorological and Land based observations’ (FASAL), a crop forecasting system [6]. The mechanism is technology enabled and supported by satellite imagery, drones, etc.
Scanty/excess/unseasonal rainfall, and at times hail storm adversely impact the crop. Weather and rainfall data is provided by the Indian Meteorological Department (IMD) in the form of periodic reports (also in public domain) that are discussed, if necessary on a daily basis, to assess crop output/damage.
Tomatoes, are sourced from several states -Andhra Pradesh, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Tamil Nadu and Telangana.
During June -July 2023, supply of tomatoes from Haryana had ceased, and the crop in Himachal Pradesh was damaged due to excess rainfall. Supply from the tomato growing states of Andhra Pradesh Karnataka, Maharashtra, and Telangana, had not commenced.
4. Excess Rainfall in tomato growing areas
There is consensus that excess rainfall adversely impacted the tomato crop in the northern states, especially Himachal Pradesh, which is an important source of tomatoes, especially the hybrid `himsona/heemsona’ variety.
The All India rainfall in June 2023, at 148.6 mm, was lower by 10.1 per cent, compared to 165.3 mm, the Long Period Average (LPA is calculated from 1971 to 2020) for June. However, the states of Haryana and Himachal Pradesh, where tomatoes are grown and sourced, witnessed excess rainfall, details of which are available in the `Climate Summary for the month of June 2023,’ June 4, 2023, Government of India, Earth System Science Organization, Ministry of Earth Sciences, India Meteorological Department. [7]
The All India rainfall in July 2023, at 467 mm, was higher by 4.75 per cent, compared to 445.8 mm, the Long Period Average for July. The IMD report for July 2023, [8] specially focussed on Himachal Pradesh. All districts in Himachal Pradesh had normal/excess/large excess rainfall, during July 2023, as can be seen in Chart 2 below:
Chart 2
Rainfall in Himachal Pradesh
Source: IMD report for July 2023
There was adequate information and data, to suggest crop losses, especially tomato, in Himachal Pradesh due to excess rainfall in June and July 2023. This impact of excess rainfall on the tomato crop, appears to have been missed by the policy makers, who as stated earlier are supported by FASAL, the crop forecasting system. [9] Accordingly there was no action, or delayed action, resulting in a sharper increase in the price of tomatoes.
In addition to damaging the crop, heavy rainfall also impacted connectivity due to severe damage to roads in Himachal Pradesh, restricting the already poor supply of tomatoes.
5. Price Stabilization Fund
The Price Stabilization Fund (PSF) established by the Government of India in 2014-15, to regulate price volatility of commodities like Pulses, Onions, Potatoes and Tomatoes, was transferred from Ministry of Agriculture & Farmers’ Welfare to the Ministry of Consumer Affairs, Food & Public Distribution w.e.f. April 1, 2016. [10]
The PSF scheme provides interest-free loans to State Governments/Union Territories (UTs) and Central Agencies to finance their working capital and other expenses, which they may incur in the procurement and distribution of the above commodities.
PSF has so far been used mainly for Pulses and Onions, for which large buffer stocks are maintained. [11]
In respect of Potatoes, private trade maintains a large stock through the practice of cold storage of potatoes, which helps to check volatility in prices, to a large extent.
Tomato prices have been left to the market forces, that can be influenced/rigged by trade, which partly explains the sharp rise. It is unlikely that the Tomato farmer is getting a higher price, in proportion to the price the consumer is paying.
6. Government intervention
In response to the increase in prices, government decided to intervene in the market and sell tomatoes at Rs 80 per kg w.e.f. 16 July 2023, [12] which had limited impact on the price of tomatoes. (Chart 1 and Table 1) The sale price is reported to have varied from Rs. 70 to Rs. 130.
The sale of tomatoes is only through the National Cooperative Consumers' Federation of India Limited (NCCF) and the National Agricultural Cooperative Marketing Federation of India Ltd (NAFED), which partly explains the limited impact, as reflected in Chart 1 and Table 1. During the onion crisis of 2019, also had participation of mother dairy, which has a large and permanent market presence.
The surprise exclusion of mother dairy in the sale of tomatoes, is accompanied with them (mother dairy) making large profits, evidence of which is in the details, which follow. On August 3, 2023 Mother Dairy sold tomatoes at Rs. 249 per kg, when the maximum wholesale price of tomatoes in the Azadpur Mandi was Rs. 4,000 for a box of 25 kg, or Rs. 160 per kg. [13] The quality of tomatoes sold at mother dairy outlets was also of medium quality, and would have a price less than the maximum. A profit of at least Rs. 89 per kg, or 36 per cent, has been made by mother dairy in the sale of tomatoes on August 3, 2023.
Mother dairy does not put in public domain, prices of products, especially fruits and vegetables, sold through its outlets. On surfing the website of mother dairy, the author did not find any prices. Bill generated on August 3, 2023 is at Annex A.
Mother dairy under the Ministry of Agriculture, is a wholly owned subsidiary of National Dairy Development Board [14] and receives concessions from the Central and State governments, tax exemptions, priority allotment of land, and at subsidised rates, to name a few. It is, therefore, surprising that Mother Dairy is allowed to make profits, at the cost of the consumer.
To Sum up
Government should review the experience of the present spike in tomato prices, to prevent recurrence in tomatoes and other commodities. In addition to putting a check on the price/profits of mother dairy, government should revisit the role of mother dairy, especially the concessions it receives.
Annex A
Bill of Mother Dairy August 3, 2023
[1] Author, Freelance, Indian Economic Service (Retired), former Senior Economic Adviser, Government of India, Ministry of Consumer Affairs, Food and Public Distribution and former Adviser (P 4) UNDP, Yemen has in posts on his website (https://rohitkparmar.wixsite.com/site), LinkedIn (https://www.linkedin.com/in/rohit-kumar-parmar-841b4724) YouTube channel (https://youtube.com/@rohitkparmar), twitter (https://twitter.com/rohitkparmar?s=09), Facebook (https://www.facebook.com/rohit.parmar.5268750/), been writing/sharing varied topics and can be reached at rohitkparmar@yahoo.com. [2] https://www.linkedin.com/posts/rohit-kumar-parmar-841b4724_a-glut-is-forcing-punjab-farmers-to-sell-activity-7058084940999012352-UTil?utm_source=share&utm_medium=member_desktop [3] Prices for Delhi as per the Ministry of Consumer Affairs web site https://fcainfoweb.nic.in/reports/report_menu_web.aspx [4] For the keen reader, prices in around 140 cities can be obtained from the above website and analyzed. [5] Details in a bill of August 3, 2023 are at Annex A. [6] https://desagri.gov.in/programs-schemes/forecasting-agricultural-output-using-space-agro-meteorology-and-land-based-observations-fasal/ [7] https://internal.imd.gov.in/press_release/20230704_pr_2411.pdf [8] https://mausam.imd.gov.in/Forecast/mcmarq/mcmarq_data/July_Month_Press_releases_2023.pdf [9] https://desagri.gov.in/programs-schemes/forecasting-agricultural-output-using-space-agro-meteorology-and-land-based-observations-fasal/ [10] https://pib.gov.in/newsite/PrintRelease.aspx?relid=160050 [11] https://pib.gov.in/PressReleasePage.aspx?PRID=1869581 [12] https://pib.gov.in/PressReleasePage.aspx?PRID=1939908 [13] Source of price of Azadpur Mandi is https://youtu.be/3iZewskWVmY [14] https://www.motherdairy.com/Category/about-us
Very Good analysis, Sir.
Your commitment for controlling price volatility of essential food items is still as strong as it was earlier when you were working as Senior Economic Adviser in Ministry of Consumer Affairs, Food and Public Distribution. I value your commitment for controlling price volatility of food items and remember how much Secretary (Consumer affairs) relied on you and your experience on these price sensitive matters. I feel lucky to work with you in that Department.