Farmers selling cheap, so why do fruits and veggies cost you a bomb?

Farmers selling cheap, so why do fruits and veggies cost you a bomb?

As Finance Minister Arun Jaitley gets down to finalise his Budget Speech, which many believe could be focused on the farm sector, the December data on consumer food price index (CFPI) and its wholesale price counterpart should offer some insight.

The CFPI-based inflation for the month of December rose to 4.96 per cent yearon-year from 4.35 per cent in November. In contrast, the wholesale price indexbased food inflation declined from 6.06 per cent in November to 4.72 per cent in December. As such, retail price food inflation has crossed past wholesale price one

for the first time in the recent months.

Though this divergence in the movement of inflation isn’t uniform across all commodities in the group but the index numbers are a pointer to the fact that while farmers continue to reel under the impact of low rise in prices aggravating the distress scenario in rural areas, consumers in cities aren’t getting farm goods that cheap.

Labour bureau data showed that wage growth of general agriculture labourers (watering and irrigation workers), which is a proxy for rural wages grew by 5.16 per cent in October 2017 – the last publicly available data – from the same period last year. It was lower than 7.2 per cent growth seen between October 2015 and October 2016.

The trend of fall in prices in wholesale markets not reflecting fully in the consumer prices is more pronounced in perishable commodities mainly potatoes and tomatoes and also in chana (gram dal) whose prices have seen a massive slump under the weight of bumper harvest.

Data sourced from the department of consumer affairs’— Price Monitoring Cell -shows that in Delhi wholesale markets from December 1 to 29, price of chana dal fell by 9.2% while in the retail markets it dropped by just 2.6%.

In case of some perishables, it was more acute.

Tomato prices in the wholesale markets of Delhi dropped by almost 74 per cent in December, while in the retail markets the commodity became cheaper by mere 47 per cent during the same period.

Tomato production in 2017-18 is expected to be 22.3 million tonnes, which is 7.7 per cent higher than last year.

Though, perfect transmission of rise or fall in wholesale prices into the retail markets shouldn’t be expected as there is an element of profit, but when the difference is large, then it is indeed a cause of concern.

Unofficial data sourced from private traders and others show that between November 2017 till January 12, 2018, the margin between wholesale and retail price of chana dal in Delhi markets has widened from around 34% to almost 77 per cent.. .click here

ARTICLE SOURCE – BUSINESS STANDARD.