Saturday, July 28, 2012

Farmers get 40-50 percent of retail price of veggies

The market distortion created by middlemen is not a surprise in a developing country like Nepal where the government lacks monitoring and supervision capabilities and political parties indirectly abet middlemen, who provide them with a strong financial and support base. Here is more on market distortion created by middlemen in Nepal.

The apparent incoherence in retail prices, farm prices and output is market manipulation by middlemen or agents, who act as monopsonist and monopolist. About 1,000 metric tonnes of vegetables enter the Kalimati Fruit and Vegetable Market during the season and about 600-700 metric tonnes in the off-season from Dhading, Kavre and Nuwakot .

So, how much of the retail price does farmers get? Here is an interesting piece in The Himalayan Times:

Farmers sell us their products at a 10 per cent profit during season, but it goes up to 20 per cent in off-season, he added. Overall, a farmer's share in the retail value of vegetables sold in Kathmandu is 40-50 per cent. The remaining 50-60 per cent cost is added during the supply process.

Local collectors — who collect vegetables from farmers and sell to suppliers — take less than others in the supply chain. Their margin is around five per cent.

Transportation usually adds 10 per cent to the cost of vegetables produced in neighbouring districts. In the process, a supplier has to bear at least five per cent hidden costs. "Suppliers have to bribe police, feed local goons, and pay taxes to District Development Committees (DDC)," said president of Fruits and Vegetable Wholesalers' Federation Khum Prasad Ghimire.

All DDCs have been taking a tax of Rs 500 for a pick up van and Rs 1,500 for a truck, he said showing bills issued from Kavre and Dhading DDCs. "It's an illegal tax and we are fighting against it at the Supreme Court," he said. Retailers have been earning more from the vegetable business. Their share is about 15-20 per cent of the retail price of vegetables. "It needs to be cut down to a maximum of 10 per cent," said member of Kalimati Fruit and Vegetable Market Development Board Ujjawal Karki.

Earlier, a government committee headed by the chief secretary brought out a report claiming that high rent inside the Kalimati Fruit and Vegetable Market plays a key role in vegetable price hike. Obviously, the association has refuted the claim by arguing that the price hike is due to short supply arising from drought in March-May and high veggie prices in India.