Are high vegetable prices here to stay? - YES

The seasonal price spikes in the vegetable market, unlike in cereals, create larger ripples in the country. Rain or drought are generally blamed for this. However, it is not annual production and demand that affects prices of vegetables; daily arrivals in the market yard create these seasonal crests and troughs.

Logistics cost is a significant component in vegetable prices; any physical short squeeze in the market — caused by non-availability of transport, poor road conditions (caused by rain) or strikes (AP) — creates havoc in price movement.

Due to the perishable nature of fresh vegetables, the consumption is confined to a limited geographical area. Hence, any logistical disruption should have resulted in a limited geographical impact.

However, due to the improved velocity of market information flows, the ripple effect gets transferred to the other geographies, where temporary short squeezes are created by narrowing the supply pipeline.

The per capita, per day availability of vegetables during the last decade has moved up from 236 gm to 350 gm, but one can observe seasonal price volatility almost every alternate year in long storage vegetables like onion, as the supply lines can be easily manipulated by a select few.

Achieving economic efficiency in terms of production increase is one of the stated objectives; however, allocative efficiency in terms of availability has never been highlighted .

Apart from the ever-increasing production of vegetables, currently standing at 156 million tonnes per annum, storage practices have not kept pace. Wastages in the sector are anything between 20-35 per cent.

While talking about wastages and the state-of-the-art cold chain solutions, it is often forgotten that the difference between the farm-gate price and market-yard price is caused by the high energy cost in transporting fresh produce.

The post-harvest loss containment by introduction of cold chain solutions (dependent on diesel and electricity) will not automatically result in cost reduction.

Adopting a high-energy-consuming, loss containment method requires energy servicing and capital servicing cost to be absorbed in the vegetable price — which is unlikely to bring down the price of vegetables.

With towns turning into cities and cities into metropolises, it is unlikely that the food miles (distance between the place of production and consumption) in the years to come will come down for fresh vegetables; with ever-increasing energy cost, vegetable prices are likely to go up.

(The author is Chief Business Officer, National Collateral Management Services Limited. The views are personal.)

Also read: > Are high vegetable prices here to stay? - NO

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