Editorial. Tomato inflation must be viewed in perspective

From time to time, heated debates have ensued over seasonal spikes in tomato and onion prices — and it is no different now. According to a recent report by Bank of Baroda, average retail tomato prices were up 38.5 per cent in June 2023 in sequential terms. A report by Nabard prepared last month says that of the ‘TOP’ family (tomato, onion and potato), tomato prices are the most volatile, with the farmer often bearing the brunt of a price crash in the winter months. A common feature of the TOP crops is that they are grown basically in three or four States, are sensitive to variations in rainfall and heat, are not available all the time, but are in constant demand.

Tomato is particularly hard to store or preserve — which explains its higher price volatility, even as onion comes a close second. A slight supply shock is amplified. As BoB’s report says, there has now been a supply shock in Gujarat, Chhatisgarh and Tamil Nadu. While Andhra Pradesh, Madhya Pradesh and Karnataka account for about a third of total tomato output, the other three States make up another 15-17 per cent. What worsens this output shock is the lack of precise information on output and cropping patterns. It is inexplicable that this should be so in the age of satellite and drone imagery. Middlemen thrive on information asymmetry, while policymakers too are unable to take the right steps. Better storage, processing, exports and transportation can ensure that prices are smoothened across regions and over time, while information flows can reduce middlemen margins. Besides, the introduction of forward markets can be considered.

A study on ‘TOP’ value chains by Ashok Gulati, Harsh Wardhan and Pravesh Sharma points out that tomato growers earn less than a third of the final product price , while retailers and middlemen earn the rest. India accounts for just 2 per cent of the global exports of tomatoes, despite being the second largest tomato producer in the world. The conversion into value added forms has simply not picked up. It is possible to spread output across States. The Centre introduced Operation Greens in 2018 for subsidising 50 per cent of the storage and transportation costs in the case of TOP (later expanded to all fruits and vegetables), particularly aimed at FPOs and cooperatives in this sector. This has the potential of Operation Flood, as Gulati et al point out, in improving distributional efficiencies, but there does not seem to have been much traction on this score. The reasons should be delved into.

Finally, TOP inflation must be seen in perspective. It is seasonal and accounts for little over two per cent of the CPI, even as it can at times cast its shadow on headline numbers. The present furore reflects an urban bias, with government prone to being anxious in an election year. The Reserve Bank of India should pay little heed to these ups and downs, as tomato prices have little to do with the repo rate.

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