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Thursday, August 06, 2020

Reduced crop, lockdown dip in demand make aloo the new pyaaz, tomato prices go up too

On Friday, all-India retail prices of potato and tomato, according to the Department of Consumer Affairs’ data, averaged Rs 30 and Rs 50 per kg respectively, up from Rs 20 each three months ago.

Written by Harish Damodaran | New Delhi | Updated: July 20, 2020 11:38:10 am
In potatoes, the current price increase is mainly due to lower production, just as it was vis-à-vis onions last year.

If last year it was pyaaz, this year it is aloo and now tamatar that are turning dearer, even as annual consumer price index (CPI) inflation, at 6.09% in June, crossed the Reserve Bank of India’s 4-6% upper target range.

On Friday, all-India retail prices of potato and tomato, according to the Department of Consumer Affairs’ data, averaged Rs 30 and Rs 50 per kg, respectively, up from Rs 20 each three months ago. The same period saw onion prices dip from Rs 30 to Rs 20 per kg.

This trend is also confirmed by information on the average sale price (ASP) for the three key staple vegetables made available by a leading online grocer to The Indian Express.

The ASP of onion charged by this retailer in the National Capital Region has fallen steadily from nearly Rs 78 per kg in January to Rs 36 in March, Rs 22.5 in May and Rs 20 during the current month. On the other hand, the ASP for potato has more than doubled to Rs 31/kg since February, while displaying extreme volatility in tomato – from Rs 30/kg in January to Rs 22 in March and Rs 14 in May, before surging to Rs 57 this month (see chart).

In potatoes, the current price increase is mainly due to lower production, just as it was vis-à-vis onions last year. Farmers in major potato-growing states such as Uttar Pradesh and West Bengal deposit the bulk of their produce harvested in January-March in cold stores for staggered sales till October-November, when planting for the next season begins. Only an estimated 36 crore bags (of 50 kg each) from the main rabi crop of 2019-20 were stocked in cold stores this time, as against 48 crore, 46 crore and 57 crore bags in the preceding three years. Farmers basically planted less in response to the low realisations since 2017.

Regular table potato or ‘mota aloo’ is now being sold from cold stores in UP at Rs 19-20 per kg. “If there was no demand drop from lockdown, the rates would have touched Rs 23-24/kg. They had actually gone down to Rs 15-16 in May, before recovering to the present levels,” says Doongar Singh Chaudhary, a farmer-cum-cold store owner in Khandauli village of Agra district’s Etmadpur tehsil.

The lockdown had led to the closure of hotels and restaurants, apart from consumption of potato-based snacks – from samosa, aloo chaat, tikki, and paav bhaji to masala dosa and French Fries – taking a knock. Chaudhary reckons that farmers have sold 25% of their crop kept in cold stores and will use another 15% as seed for the coming season. “They still have 60% that can be gradually offloaded. It is the cold stores that have saved them from distress sales during lockdown, unlike for tomato, cucumber and other seasonal vegetables,” he adds.

“Our production cost is Rs 9-10 per kg. Adding cold store, grading and other charges, plus moisture loss, takes it to Rs 13-14. This is the first time in four years we are making some money. It would have more but for the lockdown,” claims Mohammad Alamgir, general secretary of Agra’s Potato Growers Association.

In tomato, the story is different.

In May, prices in key wholesale markets such as Kolar (Karnataka), Madanapalle (Andhra Pradesh), Narayangaon and Sangamner (Maharashtra) had crashed to Rs 3-5 per kg. That was the peak arrival time for the summer tomato crop, transplanted in January-March and harvested from end-April till July. Farmers, who invest a lot in this crop hoping for better price realisations during the summer months, had to sell for a song.

The current price increase started from around the last week of June, with the tapering of supplies from the summer crop. Although such tapering is normal, it was aggravated by the earlier low prices that resulted in farmers not applying fertilisers or maintaining their crop after the first few pickings.

Tomato prices could, however, ease once the just-planted kharif crop arrives in the market. This crop, whose transplantation stretches from mid-June till end-September, has a shorter duration of 90-100 days, compared to 130-150 days for the summer tomatoes. Since it also starts yielding fruits 60-70 days after transplanting (tomato pickings happen at intervals of 3-4 days), consumers can expect some relief after mid-August.

“Kharif acreage has been 50% less so far, but high prices should induce a pick-up in plantings,” points out a seed industry executive. In potatoes, too, the kharif crop in Karnataka and Maharashtra will arrive from August and after November in Punjab. But it is very small relative to the main rabi crop.

Volatile vegetable prices will also make it challenging for the RBI to further slash interest rates in order to bring back growth and investments in a sagging economy.

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