Tomato farmers are crushing Nifty companies in profitability

The per unit economics of tomato is currently among the most lucrative in the country.

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

A visit to the vegetable market right now can be an exercise in self-flagellation. Shelling out three-digit prices for kitchen staples is an economic stress test for most household budgets, but at the other end of the spectrum, it is nothing but cosmic justice for the country’s much-suffering farmers.

The agriculture sector in India is synonymous with generating a steady stream of gloomy headlines.

The same was the case at the onset of summer this year, when growers in Nashik and some other markets were seen dumping their tomato produce on the streets after prices at the Agricultural Produce Market Committee (APMC) mandis slumped to a mere Rs 1.5 per kg due to a supply glut.

Driven by frustration and saddled with debt, a lot of the cultivators had completely shifted to planting other crops.

However, those who stayed on with the crop are reaping the bounty of Lady Luck’s benevolent gaze.

In fact, such drastic has been the reversal of fortunes that the per-unit economics of tomato is currently among the most lucrative in the country.

As expected in a market as vast and diverse as India, the tomato business has wide variations in terms of financial metrics.

The cost of cultivation can range from Rs 4 per kg to more than Rs 20, depending on factors like proximity to the market, agent commissions and labour charges.

However, even at the upper end of the input cost range, farmers are making a killing with retail prices ruling above Rs 200 per kg.

Hari Narayan Reddy, who owns big farms in Chikkaballapur near Bengaluru, said cultivators are getting around ten-times the usual rate for their produce.

“A 15-kg crate is going upwards of Rs 2,000 here. Good quality tomatoes are fetching even higher. The farmer has to pay around 10 percent of this for agent commission, labour cost, transport charges etc,” he told Moneycontrol.

In terms of input costs, a farmer spends around Rs 1-1.5 lakh per acre of tomato cultivation, depending on his financial position. An acre yields around 2,500 boxes, which can go up to 3,000 in case of a bumper crop.

“Most tomato cultivators have become crorepatis beginning July. But we must remember they also incurred heavy losses earlier this year,” he added.

For farmers who are not selling at APMC mandis and are going directly to wholesale markets, the per-kg cost is even lower as they save on the agent commission. But even with the commission and other attendant overheads, tomato farmers are operating at profit margins which the crème de la crème of Corporate India would be proud of.

According to data from ACE Equities, the highest operating profit margin for a company on Nifty 100 stood at 90.58 percent in FY23 (Bajaj Holdings & Investment).

Others in the top-5 included HDFC AMC (89.21 percent), Power Grid (88.86 percent), Muthoot Finance (78.39 percent) and Adani Green Energy (76.03 percent).

Marquee names like TCS, SBI, HUL, Dabur and Bajaj Auto are functioning below the 30 percent operating profit margin range. A dozen firms posted profit margins in single digits.

Prajapati, a 27-year-old farmer, is currently camped in a tent under a flyover in Delhi’s Mayur Vihar with his family and scores of others. The recent spell of heavy rains in North India and the consequent flooding of the Yamuna has inundated his 5-acre farm, making him a homeless in his home town. “Forget tomatoes, I would have got good prices even for other vegetables like onion and capsicum. But how can we escape what fate has in store?” he rued.

Prajapati's is not an isolated case.

The freakish weather events this year – ranging from severe heatwaves to record-shattering rains – coupled with rising incidence of pest attacks have played havoc with farmers.

In the case of tomatoes, which are highly perishable and sensitive to water and temperature variations, floods in Himachal Pradesh and pest attacks in Karnataka’s Kolar region – both major producers of the crop – resulted in a severe supply crunch, pushing prices skywards.

But only those farmers who managed to escape Mother Nature’s fury are profiting from the high prices.

The current situation in tomato is like a lottery, says Gunvant Patil Hangargekar, general secretary of the All India Kisan Sangharsh Coordination Committee.

“After the terribly low prices at the start of this season, many farmers stopped planting tomatoes altogether. Then in the monsoons, excess rainfall flooded most farms. For example, in Nanded (in Maharashtra), there was around 75 percent excess rainfall, which destroyed the tomato crops. Only the lucky few who survived both these situations are making profits now, and even they had to bear steep losses in the previous seasons,” Hangargekar told Moneycontrol.

Peer behind all the recent headlines on tomato farmers minting millions, and we are confronted with a harsh truth – agriculture is fundamentally a high-risk, low-returns enterprise for the majority of small and medium cultivators.

Devinder Sharma, a noted agricultural expert, almost loses his cool when asked about tomato farmers’ windfall gains this year.

“Did you ask them their profit margins when they were receiving Re 1 per kg? Did you ask them their cost of production when they were forced to borrow money at exorbitant rates? If they are making money now, why so much heartburn among the middle-class?” he told Moneycontrol.

The heartburn, perhaps, stems from the fact that the middle-class taxpayer ends up footing the bill for all calamities, whether local or global. Or maybe because while prices shoot up immediately in the aftermath of any disruption, they take their own sweet time to cool off, if at all.

But those stories are for another time.

For now, let us cheer the humble tomato grower having his moment in the sun.