Horticulture woes

Price volatility in onions and other vegetables points to slow progress in marketing reforms

When raids on top onion traders in the Nashik-Lasalgaon belt in Maharashtra last week brought down wholesale prices by about 30 per cent from ₹1,400 a quintal to ₹900 a quintal, it only served as a larger reminder that vested interests in agriculture marketing were as firmly entrenched as ever. A decade or more of reforms rhetoric on APMCs, providing options to farmers to sell outside the mandis while allowing private players to set up markets, does not seem to have translated into benefits to producers or consumers. A 2012 study sponsored by the Competition Commission of India into the workings of the onion trade points out: “The average experience of commission agents and wholesalers... (is) around 20 years. That indicates the existence of the same commission agents and wholesalers in the markets, who normally have huge turnovers. This creates oligopoly like situation in the market, and perhaps restricting entry for new entrants. A clear case of entry barrier.” It also points out that “in December 2010, retailers’ mark-up over the wholesale markets price was more than 150 per cent in almost all major markets in the crucial weeks of December 2010”, ruling out a demand-supply problem. The situation repeated itself in September 2013. Whether it is onion, chilli, tomato or potato, growers (generally operating less than two acres) lack risk-bearing capacity and access to market information. At the other end, consumers are often faced with nasty surprises. New markets, e-NAM and contractual arrangements such as direct selling have obviously not taken off. What’s worse, in States such as Bihar the APMC infrastructure has withered away, with no alternative infrastructure to replace it. India is estimated to need 42,000 mandis against the present 7,700, with each linked to an e-NAM platform. This will ensure fair price discovery for consumers and producers, with minimum support price becoming more actionable.

The Centre must be clear about what it must — and must not — do. It has time and again damaged producer interests by enforcing export curbs on onion and creating a supply glut. While it goes about its task of creating more mandis in partnership with private players, it should also create value chains to ensure supply-demand stability. It is possible to estimate requirement of bulk buyers in the case of onions and potatoes, and encourage processing. Funds set aside for the Price Stabilisation Fund created in 2014-15 with a sum of ₹500 crore need to be increased. Coordination with the States in this regard requires urgent emphasis. Crop insurance that covers price volatility may find takers in specific crops.

Horticulture output growth over the last decade has outpaced that of foodgrains and so has absolute output at over 280 million tonnes, but in the absence of a marketing backbone, growing vegetables and fruit is turning out into a high-stakes game. The organised retail bet hasn’t paid off. A fresh policy approach is called for.

Published on September 20, 2017

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