🍅 Tomatoes: The Next Shortage
Wondering why tomatoes are costing an arm and a leg? Here's why.
Have you noticed that sometimes the roadside chaat wala gives you lots of veggies but other times they are just stingy? You have to keep pestering, “Bhaiya tamatar aur pyaaz aur daalo!” This is because the prices of these vegetables fluctuate like crazy.
But why does this happen?
Tomatoes, onions and potatoes are staples in every Indian kitchen. Can you imagine a day when you have not consumed at least one of these veggies in one form or the other? No wonder they are always in demand.
Well, supply should balance demand for a balanced diet. But, whenever there is a shortfall in supply, the prices shoot up like crazy!
Something similar is happening right now. Early monsoons in key tomato-producing states like Karnataka, Madhya Pradesh, and Maharashtra have destroyed the crop. So, prices have almost doubled. Kolkata saw the biggest price hike, with the cost of tomatoes going from Rs. 38/kg to Rs. 72/kg in just a month.
However, a few months ago, the wholesale prices of tomatoes were as low as Rs. 3/kg. Seriously?
Yes. Just like low supply leads to high prices, humongous supplies cause the prices to fall. But why would the supply go out of hand?
You see, farmers decide on the crops they will produce in a year based on last year's demand and prices. Since farmers saw good returns in 2020 despite the lockdown, more farmers chose to produce more tomatoes. Result? A bumper harvest.
Turns out a bumper harvest is not always a reason to celebrate.
The price of tomatoes fell so much that their sale wouldn't even cover the transportation costs for farmers. So, destroying the crops seemed like a better option than trying to sell them.
To sum up, when the supply is high, the prices plunge, which hurts farmers and dissuades them from planting tomatoes in the next cycle. When the supply is low, the prices shoot up, hurting customers but incentivising farmers to produce more.
A vicious cycle, indeed!
The worst part? Even when customers pay a hefty price, the benefits don't trickle down to the farmers. As per a ICRIER-NABARD study, farmers receive only 32.1% of the amount we pay for tomatoes.
But, can this vicious cycle ever be broken?
Government Measures
To control the price volatility of crops, the Indian government launched 'Operation Greens' in 2018. The 500-crore plan provides farmers with 50% subsidies on the transportation of crops and their storage.
But how will transportation and storage solve the problem?
You see, tomatoes are highly perishable and have a low shelf-life. If the farmers don't have proper storage and transportation facilities, they will be forced to take the price that is given to them by the market. So a proper infrastructure essentially increases their bargaining power so that the farmers can fetch a better price.
What about the customers?
The plan is similar to 'Operation Flood' (AMUL Model), which involves collecting milk on a large-scale from cooperatives and dairy farmers without any extra commissions or fees. The milk is stored when the supply is more and processed to make skimmed milk powder. So, when supply falls, customers can depend on the processed milk product. The model stabilises the price of milk and makes sure that the dairy farmers receive 75-80% of the customers' money.
The plan aims to develop Farmer Producer Organisations, agro-logistics to reduce losses after crops are harvested, and create a network that can give farmers real-time information about the demand, supply, and prices of TOP crops.
But the plan hasn’t made much difference yet. So, what are the other steps that can be taken?
The Missing Link: Processing
Storage alone does not solve the problem for tomatoes. Owing to its perishability, it still needs to be sold quickly. And not just sold, consumed too. But, how?
Processing! In times of high demand and low supply, Indians can switch to using tomato puree instead of the actual thing. This will reduce the pressure on the market and prevent prices from increasing. A win-win for both farmers and consumers, no?
Despite India being the second-largest producer of Tomato after China, only 1,50,000 tonnes of tomatoes are processed annually, which is 1% of its production capacity.
The processing infrastructure and consumer acceptance for processed tomatoes is yet to be developed.
Will Indian households, with their obsession with "natural" products, be able to make the shift and accept processed products?
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