Are high vegetable prices here to stay?
SHYAMAL GUPTA
The seasonal price spikes in the vegetable
market, unlike in cereals, create larger ripples in the country. Rain or
drought are generally blamed for this. However, it is not annual production and
demand that affects prices of vegetables; daily arrivals in the market yard
create these seasonal crests and troughs. Logistics cost is a significant component in
vegetable prices; any physical short squeeze in the market — caused by non-availability
of transport, poor road conditions (caused by rain) or strikes (AP) — creates
havoc in price movement.
Due to the perishable nature of fresh
vegetables, the consumption is confined to a limited geographical area. Hence,
any logistical disruption should have resulted in a limited geographical
impact.
However, due to the improved velocity of
market information flows, the ripple effect gets transferred to the other
geographies, where temporary short squeezes are created by narrowing the supply
pipeline.The per capita, per day availability of
vegetables during the last decade has moved up from 236 gm to 350 gm, but one
can observe seasonal price volatility almost every alternate year in long
storage vegetables like onion, as the supply lines can be easily manipulated by
a select few.
Achieving economic efficiency in terms of
production increase is one of the stated objectives; however, allocative
efficiency in terms of availability has never been highlighted. Apart from the ever-increasing production of
vegetables, currently standing at 156 million tonnes per annum, storage
practices have not kept pace. Wastages in the sector are anything between 20-35
per cent.
While talking about wastages and the
state-of-the-art cold chain solutions, it is often forgotten that the
difference between the farm-gate price and market-yard price is caused by the
high energy cost in transporting fresh produce. The post-harvest loss containment by
introduction of cold chain solutions (dependent on diesel and electricity) will
not automatically result in cost reduction.
Adopting a high-energy-consuming, loss
containment method requires energy servicing and capital servicing cost to be
absorbed in the vegetable price — which is unlikely to bring down the price of
vegetables. With towns turning into cities and cities into
metropolises, it is unlikely that the food miles (distance between the place of
production and consumption) in the years to come will come down for fresh
vegetables; with ever-increasing energy cost, vegetable prices are likely to go
up.