14/10/2019 - Government Policies

KEY POINTS

·        Tomatoes-onions-potatoes (TOP) are the three basic vegetables that face extreme price volatility and the government often finds itself on the edge in fulfilling its dual objectives of ensuring remunerative prices for farmers and affordable prices for consumers.

·        With a coefficient of variation (CV) of 52 per cent, onion is the most volatile, followed by tomato (47 per cent) and potato (31 per cent).

·        Potato is the least volatile because of higher processing-to-production share (7 per cent) than onions (3 per cent) and tomatoes (1 per cent), and also because of large storage facilities for potatoes.

·        The current spike in tomato prices is due to lower supply from major tomato producing states like Maharashtra and Karnataka owing to heavy rains.

·        The government had announced “Operation Green-TOP” with an allocation of Rs 500 crore in its budget of 2018.

·        The idea was to build value chains of TOP on the lines of “Operation Flood” (AMUL model) for milk in such a way that will ensure a higher share of consumer’s rupee goes to farmers and stabilises their prices. The scheme is nested with the Ministry of Food Processing.

·        But TOP are mostly traded in APMC markets, with layers of mandi fees and commissions, and farmers get less than one-third of the consumer’s rupee.

·        For stabilising retail prices of fresh TOP, and ensuring a higher share of the consumer’s rupee to farmers, policy makers need to focus on three things.

Sustainable price stabilisation

·        Ample storage for buffer stocks has to be created. While potatoes and onions can be stored, 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 be rationalised. If the government feels that 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 Tomato, Onion, Potato. Since buffer stocking for tomatoes is not possible, processing remains the only solution. For this, the GST for tomato puree and juice should be reduced from 12 per cent to 5 per cent. Milk and most milk products attract 0 to 5 per cent GST.

·        India needs to have time bound targets to process and export at least 10-15 per cent of TOP production. While India exports 10-12 per cent of onion production in fresh and dehydrated form, it exports less than 1 per cent 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.

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