When potatoes pinch and red chillies taste sweet

The average share of farmers in the consumers’ rupee is estimated in the wide range of 28 per cent and 78 per cent across 14 crops, with a lower share in the case of perishables (particularly, vegetables like potato and onion) and higher share in case of non-perishables (such as oilseeds and spices), according to a Reserve Bank of India (RBI) survey.

As a proportion of the final price paid by the consumers, the farmers’ average share in retail price is the least in the case of potatoes (28 per cent) and the highest in red chillies (78 per cent), the survey showed. The survey was carried out across 18 states.

In the case of 12 other crops, the farmers’ average share in retail prices are: onions and green chillies (33 per cent each), rice (49 per cent), turmeric (55 per cent), tur (60 per cent), tomato (61 per cent), moong (63 per cent), banana (65 per cent), urad (68 per cent), brinjal (74 per cent), soyabean (75 per cent), and groundnut (76 per cent).

Mark-ups

The mark-ups are influenced by a number of factors, including commissions and mandi charges, loading/unloading charges, packing, weighing and assaying charges, transport costs, shop rentals and local taxes, storage costs and membership fees, and the profit margins of traders and retailers. The sensitivity of mark-ups to these factors are often commodity and region/state specific, the survey showed.

Further, it was found that the mark-ups at the production and consumption centres for the traders and the retailers were different ― retailers’ margins were generally higher than the traders’ margins in consumption centres across commodities, possibly due to significant product loss at the retail stage, particularly for perishables. However, no such clear pattern was observed at the production centres.

Cash is king

Cash continued to be the dominant mode of payment at the mandis at an aggregate level across commodities and states, with 88 per cent farmers and 84 per cent traders preferring cash. The mode of cash payment was even higher at the level of retailers at 93 per cent, the survey showed.

The survey findings showed that there was no significant delay in payments by counter-parties at the mandis as around 80 per cent of the respondents reported that payments were made within two days of the completion of physical transactions of the commodities, said Binod B Bhoi, Sujata Kundu, Vimal Kishore and D Suganthi of the Department of Economic and Policy Research (DEPR), in an article in the RBI Bulletin.

Profitability of occupation

The qualitative responses at the aggregate level showed a majority of the farmers (i.e., 62 per cent) revealed that their selling prices were higher than their costs, the survey said.

In addition, the farmers’ perceptions about their ability to recover costs varied across commodities ― relatively lower for vegetables compared to other commodities.

Government policies

When the feedback of farmers, retailers and traders on government policies which have helped them, or which could help them in future, if implemented, was sought, a majority of the farmers were of the view that minimum support prices (MSPs) for crops and readily available market information are helpful in realising better prices.

Farmers also said reliable weather forecasts, improved storage facilities and government advisory on crops could help them take better cropping decisions.

On the availability of information regarding prevailing prices of commodities at mandis, a majority of farmers said they were aware of the prices before taking their produce to the mandis; the major source of this information was other farmers and traders in their contact group.

A majority of the traders reported that assaying of products and de-notification of certain products from the Agriculture Produce Marketing Committee (APMC) by the government helped them. They were of the view that improving the storage facilities at mandis and allowing free trade could help them further.

The government’s supply management measures and better availability of information on the supply-demand situation in the market could help arrest price pressures, the survey showed.

A majority of retailers felt that prevailing market prices and costs incurred in buying/delivery of products from farmers/ traders determine their selling prices. Further, prices paid and costs incurred are the two major factors that they consider while changing their selling prices to final consumers.