Onions travel long, costly road to table
At one of India's biggest wholesale markets, 65-year-old Ganpat Sakharam Jadhav sold his 2-tonne onion harvest on a recent day at 13 rupees (29 US cents) per kilogram, and he wasn't happy.
January 28, 2011 / 17:28 IST
At one of India's biggest wholesale markets, 65-year-old Ganpat Sakharam Jadhav sold his 2-tonne onion harvest on a recent day at 13 rupees (29 US cents) per kilogram, and he wasn't happy.
A day earlier, as he uprooted the crop from his field in the heart of western India's onion belt, the price was twice as high."I know prices will go up again once arrivals go down in the next few weeks. But by that time, these onions will rot. I will not get even a rupee," said Jadhav, separating leaves from the purple mound of bulbs in his trailer attached to a tractor.Three days later and about 200 (125 miles) to the south at a market in the Bandra district of Mumbai, 32-year-old Anita Fernandes bought onions harvested at the same time for 40 rupees per kilogram, triple what Jadhav was paid, after the produce passed along a lengthy chain of middlemen.India's volatile food prices have mostly risen for the past year and a half -- onion prices alone jumped 346% over 20 days last month after heavy rain wiped out crops -- driving broader inflation and adding pressure to a government that faces elections in important states this year.The surge in prices of onions and tomatoes as well as meat, milk and edible oils underscores India's tight supply-demand balance as consumption rises on the back of nearly 9% economic growth, as well as entrenched inefficiency that adds to costs and waste.As demand soars and Indians consume more and higher-quality food, output has failed to keep pace amid political resistance to reforming a farm economy based on small holdings, reliant on monsoon rains and lacking adequate cold storage, which keeps the gap between farm gate and retail cost wide.Globally, food prices hit a record high in December.In India, food inflation has been in double-digits for most of the past year, with onions -- the most widely used vegetable -- coming to symbolise the frustrations of ordinary people."We can't avoid onions, but prices are so high that we have to reduce consumption," Fernandes said.Governments have shied away from reforming the agriculture sector as farmers make up an big voting block. At most, authorities have tinkered with a system that analysts say needs overhauling to attract private investment.Farm to table -- and in betweenBy the time Fernandes bought her onions they had changed hands four times, adding over a quarter to the cost at each stop.Traders in Pimpalgaon, after buying onions from farmers such as Jadhav, pack them into gunny bags and sell them to a wholesaler in a place like Vashi, on the outskirts of Mumbai.The wholesaler in Vashi sells to a mid-sized vendor at Dadar in central Mumbai, who in turn sells to small vendors across the city, where people like Fernandes buy produce.At each step, perishable vegetables and fruits are unloaded and loaded into vehicles, delaying their journey and adding to wastage, which is typically up to 30%.As in most farming communities in India, cold storage is unavailable in the village north of Mumbai, forcing farmers like Jadhav to offload produce at whatever price they can get.A victim of timing, Jadhav sold his produce immediately after harvesting despite the lower price as he had no other option. The price had plunged as a new crop arrived at the Pimpalgaon market."Vegetable supplies are not smooth and that's why prices are volatile. We take the risk of buying in such a volatile environment," said Atul Shah, an onion trader in Pimpalgaon.Waste and wantIndia, the world's second biggest producer of fruit and vegetables, produced 226.87 million tonnes of horticultural crops in 2009/10, up 55% from 2001/02, government data showed. Still, 46% of Indian children under five are malnourished.Rising incomes and greater health awareness, especially among urban Indians, have boosted demand for fruit and vegetables, keeping prices firm and prompting farmers to increase acreage.But wastage due to poor post-harvest management and lack of cold storage and transport costs up to Rs 50,000 crore (USD 11 billion) annually, according to a government committee report."There is no problem in terms of production of fruits and vegetables. The only question is how we are going to carry farmers' produce to consumer end without any wastage," said Madan Sabnavis, chief economist at CARE Ratings in Mumbai.To expand cold storage facilities, the government announced schemes including allowing offshore borrowing, but the industry response has been lacklustre."Cold storage is not an attractive business. Margins are low. If you have front-end operations like retail chains then it makes sense," Sabnavis said.While retail chains have such facilities, their capacity is tiny compared with total production in a country where organised operators account for just 6% of overall retail sales.Meanwhile, rules limit foreign direct investment in multi-brand retail, frustrating the ambitions of global operators such as Wal-Mart Stores and Carrefour.The entry of multinational retailers has been mired in controversy, with moves to open up the sector opposed by leftist parties and small traders fearful of job losses.But the retail chains can't completely bypass traders, as small land holdings force them to rely on big traders for supplies."We need quantity in bulk, but most farmers produce tiny amounts. There is a need of aggregator at the farm level who can ensure us steady supplies in bulk," said a senior official at a large retail chain, who declined to be identified.Namdev Patil, a 35-year-old farmer in Lasalgaon, in Maharashtra, failed to recover his investment as unseasonal rain in November slashed yields in his onion field by 70%, an experience shared by many farmers."Traders are buying from us at lower price and making huge profits. We can't do anything," he said.(USD 1 = 45.6 rupees) Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
