Farmers’ share in rabi crop consumer prices ranged from 40-67%: RBI survey

Around one-fourth of the respondent wheat farmers in the 2024 survey are reported to have sold their output to the government under a procurement system. Procurement at minimum support price gives farmers an assured market option. The estimate of 67 per cent is consistent with the available literature which suggests that wheat farmers’ share in the consumer price ranges between 53 and 74 per cent, said the survey report authored by five RBI officials.

Perishable crops (fruits and vegetables) have lower farmers’ share and higher trader/retailer markups than the non-perishables. The combined share of traders and retailers in consumer prices is more than half in perishables (except for tomatoes), the survey said.

“The farmers’ share in the prices of perishable commodities (fruits and vegetables) is estimated around 40-63 per cent. The share in consumer prices in case of perishable items can fluctuate widely depending upon the prevailing demand-supply conditions,” the study said.

The existing literature suggests farmers’ share to be in the range of 30-50 per cent of the final price in the case of fruits and vegetables. The perishable products are characterised by short shelf-life cycles, seasonal production, diverse quality and quantity, special logistical requirements, quality standards, demand and cost uncertainties, dependency on climatic conditions and supply chain lead time that create more uncertainties about their timely and sufficient availability in the markets, it said.

The retailers’ markups are generally observed to be higher than those of the traders.

Within pulses, lentil producers receive around 66 per cent and gram (chana) around 60 per cent of the rupee spent by the consumers, the survey said. A higher share of farmers is desirable for lentils to incentivise production, since it is mainly grown by small-holder farmers and there is significant import dependency.

Within oilseeds, farmers’ share for rapeseed and mustard (R&M) stood at 52 per cent, compared with the 55 per cent estimate reported by a 2021 study.

Fruits and vegetables supply chain unorganised

In India, the fruit and vegetable supply chain comprises many unorganised intermediaries, which creates difficulties in identifying the flow of products, funds and information across the supply chain, and, can compress farmers’ share in consumer prices, it said.

A lower share for farmers can also act as a constraint for farmers in diversifying from traditional cereal crops, the survey said. As per the current survey, the combined share of traders and retailers is estimated to be more than half for all surveyed fruits and vegetables except tomatoes. “Amongst the set of crops which were surveyed in previous kharif rounds and this rabi round survey, the farmers’ share in retail prices of rice is estimated at around 52 per cent in this survey,” it said.

The shares were 45 and 49 per cent during the Kharif surveys of 2022 and 2018, respectively. TOP items (Tomato, Onion, Potato) are primarily rabi crops. The farmers’ share in consumer prices in the rabi survey is also broadly comparable to the estimates of the previous two kharif surveys, it said.

The survey covered mandis/villages in 86 centres across 18 states for 12 rabi crops using three separate questionnaires for farmers, traders and retailers. It included 10,699 respondents across various consumption and production centres. The survey was conducted during May-July 2024 in select production and consumption centres separately, considering the difference in supply chain dynamics of production centres, confined majorly in rural areas and consumption centres lying mostly in urban settlements.

The government is also active in procuring it through the public procurement system to provide an assured market for the farmers, it said.

While cash transactions dominate the payments in the agriculture supply chain, electronic payments registered a significant increase in 2024 survey over the previous surveys of 2018 and 2022 for all the participants, the report said. The weather forecast and irrigation availability appear to be the most critical factors in the farmers’ decision function regarding rabi sowing. An empirical analysis of mark-ups, using the survey data, indicates that higher transaction costs (transportation, labour, rent) reduce the retailers’ markups, while higher post-harvest losses in perishables seems to permit the retailers to pass losses onto the consumers, it said.