The Green Gang Up

Prime Minister Narendra Modi often spoke of skyrocketing food prices during his campaign trail, striking a chord that ended in victory barely five months ago. From then to today, his silence—and that of his party—over the high vegetable and fruit prices has been deafening. Fina­nce minister Arun Jaitley did acknowledge that high vegetable prices are a problem. But the lacklustre measures announced thereafter—stopping some exports, non-bailable warrants against a few hoarders (classic UPA-style ‘crackdowns’)—never hit the spot.

A big move did come in Delhi where vegetable and fruit producers stand released from the shackles of the mandi system. Other states are being encouraged to follow suit, to little gain so far. In Gujarat and Maharashtra, there have been protests, though Karnataka and Uttarakhand have gone ahead. The lower rate at which prices are climbing up today, compared with exactly a year ago, is perhaps not much to crow about—and so, it seems, the government hasn’t come forward to take credit for this.

“Prices aren’t going to come down but the rate of this rise will come down,” predicts Ajay Vir Jakhar of the Farmers Forum, which provides a platform for small farmers to consult with the government. He doesn’t think the recent uns­ha­ckling of vegetable and fruit growers is a magic wand either. “Prices are going up a little slower than earlier because international commodity prices, such as of fuel, are softer. It’s got nothing to do with what the government has done,” he says.

That nothing’s quite right with the farm sector is quite obvious. One week the­re’s news of an indebted sugarcane- growing farmer in western UP committing suicide, the next Nagpur’s onion far­mers protest a ban on export, as aut­h­orities struggle to keep domestic prices low. Meanwhile, north Indian city-dwe­llers last week greeted a rather strange sight—the summer fruit mango was fre­ely available in autumnal September.

“Nobody really knows what’s happening,” says Kishan Bir Chaudhary of the Bha­ratiya Krishak Samaj, a farmers’ lobby group. “I think the government sho­uld fix wholesalers’ and retailers’ margins. Nobody can be allowed to mark up prices beyond 30 per cent,” he avers. So, if a farmer sells cauliflower at Rs 10 for five kilos, a consumer must be able to buy it at Rs 13 for the whole lot, no more.

It’s free season for comment, but this is exactly the kind of alternative that nobody can seriously consider in India right now. In fact, what happened in Delhi’s mandis was exactly the opposite: fruit and vegetable farmers were set free to sell to whomever they like, wherever they want, at the mandi or elsewhere. “Now that farmers are free, where exactly are they expected to drop their baskets of gobi (cauliflower)? At whose doorstep shall they deliver their sacks of potatoes?” quizzes Chaudhary.

Nobody has all the answers yet but in the next six months a new market at Alipur, near Delhi’s border with Hary­ana, could be one such place for farmers. Here, the government is setting up a new “farmer’s market” from scratch, where growers won’t have to ferry all of their produce, just a sample. The model is already in place in states like Tamil Nadu. Farmers will take orders and deliver produce to buyers directly from their own warehouse or farm. That this new marketplace is necessary is obvious from official data: at 64 per cent in August, more than any other item vegetables and fruits contributed the most to retail food inflation.

Meanwhile, the entire vegetable and fruit economics appears in need of a gigantic overhaul—one that will requ­ire tough decisions. Dr Rajiv Kumar, senior fellow at the Centre for Policy Research, recommends bold, immediate reforms to help lower prices—allowing import of fruit, for instance. “India has a lot of stupid non-tariff barriers and the most obnoxious tariff structure. Can anyone explain why we tax grapefruit imports at 100 per cent while the average import duty on fruit is 30 per cent? I’m not suggesting anything unusual, just that we send the right signal overseas. Politicians must understand that these steps will lower inflation while having the neighbours sing their praises,” he says.

Last year, India imported fruit worth Rs 4,000 crore (which is small fry). None of this prevents longer-term measures, like encouraging farmers to grow even more fruit. Today, India is the globe’s fourth lar­gest horticulture producer. “While government worries over what traders will think if they lose monopolies, what it must hear is the people’s anger against rising prices,” Kumar adds.

Modernisation, FDI and a better cold chain, those are of course the other elements in this recipe. But each are a political hot potato, hard to sell even in the best of times. It’s these long-term steps that the government is expected to tackle in coming months, having got the easy ones out of the way already. “There’s a glut of vegetables in the market whenever they are in season. That doesn’t mean there isn’t a problem in their supply,” says Jakhar. He says there just isn’t enough research into crop varieties that are fit to store and process over long periods—the mango in September may be a rare case of the right variety, or a stock that came in late from the southern states. “Otherwise, there isn’t enough fruit and vegetable to process in India. We don’t grow enough of the right type,” says Jakhar, whose grouse is the low budget for agriculture despite the government’s claims that it wants to improve supplies to reduce prices.

Last year, a price stabilisation fund was set up, with a paltry allocation of around $80 million. Another $800 million got allocated to cold storage, but the investment is too low to encourage new units in rural areas, where too fruit and vegetable prices are galloping. In the meantime, the average consumer faces a baffling situation: to all  appearances, there’s a glut of vegetables and fruits in the market. They are there for the tak­ing but at prices that are unaffordable.

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Retail Food Inflation

• 11.22 % July 2013
• 9.36 % July 2014
• Annual retail inflation 64 % Since January 2012: 9.5 % of which fruit and veggies are roughly 64 %
• 35 % The food bill is 35 % of household expenditure now

Overall picture: Prices are not going to come down but the rate of rise will reduce.

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Agri Maze Cracked?

Achche din are on their way, in a man­ner of speaking. Much of what India doesn’t know about its GDP may soon be uncovered, as a three-year-old exercise to measure economic performa­nce against 2010-11, instead of 2004-05, gets under way. A team of the ministry of statistics, headed by agricultural expert Dr Mahendra Dev, has submitted its rep­ort. The exercise reco­mm­ends ways to mea­sure parts of the agricultural economy that have so far escaped official statistici­ans. Once included in GDP numbers, clea­rly India’s economy will look better on paper—and all without a single policy change. “Yes we are trying to get a clearer picture of GDP numbers, and it could be bigger than current estimates,” says Prof Dev. The exercise may also please the RBI, which said last Tuesday afternoon that it’s hard to predict where India’s inflation will be in ’16. The 2015 target of six per cent inflation, though tough to meet, app­ears feasible just by gazing at existing data, but the future beyond is a blur.