Agents send crops around in circles

NEW DELHI, November 4: The famed Indian ingenuity operates in a truly ingenious way in the business of taking farm produce from farmer to co...

NEW DELHI, November 4: The famed Indian ingenuity operates in a truly ingenious way in the business of taking farm produce from farmer to consumer. In Meerut, this takes the form of loading the vegetable produce of the area on to trucks, transporting it to Delhi and taking vegetables right back from Delhi to the mandi in Meerut for sale.

The reason is simple: The operations of people who pay the advance money, and generally the middlemen in the distribution chain. While one farmer8217;s total tomato crop, say, could be 500 kilos; he does not have more than five-odd kilos to sell at a time. That means it is never economic for him to go to the market to sell. Indeed he never does except to sell non-perishables.

So, instead of Mahomet going to the mountain the mountain collects the produce from his doorstep. The mountain does not, however, proceed from there to the local mandi. The same process of collection duplicates itself at several levels, village, tehsil, until it is all collected and transported to a large urban centre, in this case Delhi and not Meerut.

Here, the process reverses itself: The vegetables are now distributed for sale in the mandis.

Enterprise is never lacking but it is ruthlessly stifled by this system. Entrepreneurs who do not wish to be named say their attempts to sell Himachal apple directly in Ludhiana came a cropper because retailers would only buy in Delhi, so they simply could not compete. And so, Himachal apples which are to be sold in neighbouring Chandigarh first find their way to Delhi before looping back to Chandigarh.

Allowing for six to seven middlemen and even a markup of 10 per cent for every link in the chain, the product is 70 per cent costlier than the price at which it was first sold. As it happens, the markup per middlemen is seldom only 10 per cent. The vegetable is normally at least 200 per cent costlier by the time it reaches the consumer.

This is why onions and tomatoes can sell for Rs 4 a kilo in Nashik and still go through the roof in Delhi. It also explains something else.

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Onion output dropped from about 44 lakh tonnes to about 38 lakh tonnes. Onion exports in a year are about 4-5 lakh tonnes. Now, with exports banned, this almost covers the shortfall in domestic supply. True, the supply has been delayed, but that does not explain the dramatic price spiral.

With all the noise about benefiting the farmer the beneficiary is clearly someone else. Consider the case of the commission agent. He is the agent for both the buyer 8212; in, say, Bombay, and the seller in Himachal 8212; in the case of apples, for instance. How interested would he be in getting the best price for the farmer especially since the advance amount comes from the other side?