Sunday, August 5, 2012

Difference between farm price and wholesale price of fruits and veggies

Here is an interesting piece about the lawlessness in Kalimati wholesale market for fruits and vegetables. Kantipur’s Lokmani Rai reports the distortions created by YCL, the Maoist party’s youth wing, and syndicated business. 

Below is a snapshot of the difference between farm price and wholesale price of fruits and veggies.

Price difference (Rs per kilo), 2012-08-03

Farming site (Dharke, Dhading)

Wholesale market (Kalimati, Kathmandu)

Tomato 25 48 52.08
Pumpkin threads (per roll/mutha) 8 15 53.33
Pear 15 35 42.86
Bitter melon 16 35 45.71
Cauliflower 18 40 45.00
Cucumber 27 35 77.14

Other stuff from the article:

  • In the wholesale market spread over 42 ropanis, two to four dozen farmers are left to squeeze in a small corner to sell veggies. There are about 450 stalls, including 300 wholesale stalls, in Kalimati Fruit and Vegetable Market.
  • Since the last six years the YCL has grabbed 45 stalls without even paying rent and electricity bills. The owe about Rs 6.5 million to the management.
  • The rent for each stall ranges from Rs 5000 to Rs 7000 per month. But, middlemen charge as much as Rs 70000 per stall per month. Only a dozen stalls are owned by ‘real’ farmers and only 20 percent of the stalls are operated without middlemen being involved in rigging rents.

Earlier, a report about the same issue stated that farmers get 40-50 percent (similar is the case with the percentage of farm price in wholesale price in the table above) of retail price of veggies sold in Kathmandu.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 .

Furthermore, 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.