From UPSC perspective, the following things are important :
Prelims level : TOP scheme
Mains level : Food processing; TOP; rise in prices
Op-ed of the day is the most important editorial of the day. This will cover a key issue that came in the news and for which students must pay attention. This will also take care of certain key issues students have to cover in respective GS papers.
Last month, onion retail prices crossed Rs 40/kg in Delhi.
- The government imposed a minimum export price (MEP) of $850/tonne.
- Later on, as prices went further up to Rs 50-60/kg, stocking limits were imposed on traders and exports of onions were banned.
- It created problems in neighboring countries, especially Bangladesh.
- These knee jerk reactions like export bans or stocking limits on traders only show the hollowness of our policies.
- A lot can be improved in addressing large price volatility of basic vegetables.
- Tomatoes-onions-potatoes (TOP) are the three basic vegetables that face extreme price volatility.
- The government is often on the edge in fulfilling dual objectives of ensuring remunerative prices for farmers and affordable prices for consumers.
- Onion is the most volatile, followed by tomatoes and potatoes.
- Potato is the least volatile because of higher processing-to-production share than onions and tomatoes. Also, there are large storage facilities for potatoes.
- Of the total 8,000 plus cold storages in India, 90% are used for storing potatoes. Tomatoes can’t be stored for long.
- The current spike in tomato prices is due to lower supply from major tomato producing states like Maharashtra and Karnataka owing to heavy rains.
- It was started with an allocation of Rs 500 crore in the budget of 2018.
- The idea was to build value chains of TOP on the lines of “Operation Flood” (AMUL model) for milk.
- The aim is to ensure a higher share of consumer’s rupee goes to farmers and stabilises their prices.
- The AMUL model is based on large procurement of milk from farmers’ cooperatives, processing, storing of excess milk in skimmed milk powder form during the flush season and using it during the lean season, and distributing milk through an organised retail network.
- Milk does not pass through any APMC, involves no commissions, and farmers normally get 75-80% of the consumer’s rupee, as per AMUL’s claims.
TOP – success
- TOP is mostly traded in APMC markets, with layers of mandi fees and commissions, and farmers get less than one-third of the consumer’s rupee.
- An ICRIER-NABARD study on “Deconstructing Value Chains of Tomatoes, Onions, and Potatoes”, the farmer’s share is found to be 32.1%, 29.1% and 26.6% of a consumer’s rupee for TOP respectively.
- Massive reforms in APMC.
- Ample storage for buffer stocks has to be created. Potatoes and onions can be stored. But, repeated stocking limits on onion traders discourages private investments in modern cold storages.
- For inviting large private investment in storages, the Essential Commodities Act has to go. If the traders are colluding to rig the market, then the Competition Commission of India should look into it.
- The government banning exports or imposing stocking limits is not a solution.
- Increase processing capacities for TOP. Buffer stocking for tomatoes is not possible. Processing remains the only solution.
- GST for tomato puree and juice should be reduced from 12% to 5%. Milk and most milk products attract 0 to 5% GST.
- To propagate the use of processed products (tomato puree, onion flakes, powder) among urban and bulk consumers (hospitals, schools, armed forces), the government should run campaigns in association with industry organisations, as was done for eggs.
- India needs to have time bound targets to process and export at least 10-15% of TOP production. India exports 10-12% of onion production in fresh and dehydrated form, it exports less than 1% of tomatoes and potatoes production.
- Direct buying by organised retailers from farmer producer organisations (FPOs) through contract farming, bypassing the mandi system, should be encouraged.
- TOP cooperatives and retail outlets like Safal across the country should be opened. With over 400 Safal outlets across Delhi-NCR, onions are being sold at Rs 25/Kg when retail prices are hovering between Rs 50-60/Kg.
- Need for value chain development starting with market reforms along with overhauling the infrastructure of existing APMC mandis in the country.
- Kolar mandi, one of the largest tomato mandi in the country, revealed that the operations of the mandi have spread to adjoining areas. It requires at least two to three times more land and much better infrastructure.
- These reforms and investments can be undertaken on a public-private partnership (PPP) basis, commissions can be reduced, contract farming can be encouraged, along with setting up of private mandis for better efficiency.
The government needs to find a sustainable solution for price stabilisation of TOP, rather than taking temporary ad hoc measures. It is time to TOP up.