The Hindu Business Line : ‘Farmers get only half the price consumers pay’

The study, undertaken by the Multi Commodity Exchange in August last year, shows that margins for traders, intermediaries, processors and others account for nearly half of the cost footed by the consumer.

As per the study, a farm product changes hands at least five times before it reaches the consumer from the farmer. In the process, mostly, value-addition to the product takes place only twice, with the other intermediaries looking just to add to their margins.

An MCX research team took up the study to find out how value-addition happened in a product before it reaches a consumer from a farmer, and at what cost.

The study throws up some interesting facts. The margin earned by brokers, millers, canvassing agents, wholesalers and retailers put together is between 38 per cent for a product like chana (gram) and 67 per cent for urad (black matpe).

MCX undertook the study in four products — chana, urad, tur (pigeon pea) and wheat. It traced the movement of these commodities from the growing areas to the Mumbai retail market.

Value-addition

In the case of chana, during the period of study, the consumer in Mumbai paid Rs 3,800 a quintal, while the farmer got only Rs 2,250. In the case of urad, the consumer paid Rs 5,600 a quintal and the farmer was paid Rs 3,000.

It also shows that the retailer’s margin is anything upward of Rs 100 a quintal. Value-addition was in the form of processing, grading and packaging, while other costs involved various levies and transportation, which was about Rs 145 a quintal for these produce.

The study was done when futures in chana, urad and tur were banned by the Centre after their prices began soaring on supply being unable to meet rising demand.

Info gap

According to Mr N. Shanmugam, Economist of MCX, the findings are only a “small drop in a larger ocean of farm commodities trade”. Lack of knowledge and information mainly hampered farmers from getting better returns for their produce.

The study also gives an insight into why retailers are up in arms over large corporate houses setting up retail outlets to sell farm products directly. Analysts say sale of such farm products by big corporate firms may guarantee only a slight improvement in prices for growers. “They still will be making a neat margin,” they say.

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