Consumers wait in a long line, braving the rain, to buy tomatoes at a subsidized price at MVP Rythu Bazaar in Visakhapatnam on July 18. | Photo credit: KR Deepak
The story so far: As tomato prices fluctuate between ₹100 and ₹200 in various parts of the country, the latest monthly bulletin from the Reserve Bank of India highlighted that volatility in tomato prices has historically contributed to overall inflation levels in the country. .
How are tomatoes produced in India?
Tomato production in the country is regionally concentrated in the states of Andhra Pradesh, Madhya Pradesh, Karnataka, Odisha and Gujarat, which account for nearly 50 percent of total production, according to figures from the Ministry of Agriculture and Farmers’ Welfare. There are two main tomato crops every year – kharif and rabi. The rabi crop hits the market every year between March and August, while the kharif crop hits the markets from September. Some regions of Maharashtra and Solan of Himachal Pradesh are capable of growing tomatoes during the monsoon months, while in summer Madanapalle region of Andhra Pradesh alone accounts for tomato cultivation in the whole country. As for tomato production, it peaked in 2019-2020 at 21.187 million tonnes (MT) and has been declining ever since. In 2021-22, it fell to 20.69MT and 20.62MT in 2022-23.
How much have tomato prices gone up since last month?
At the end of June, tomato prices doubled in retail markets in one day. According to data from the Ministry of Consumer Affairs, the pan-India modal price (rate at which most transactions take place) in retail markets increased from ₹20/kg on June 24 to ₹40/kg on June 24, likely the maximum rise of a single day.
In the first 24 days of June, the modal price was ₹20 per kg. In the last week of June, the modal price jumped to over ₹50 per kg. On the last day of the month, it peaked at ₹100 per kg.
As of Saturday July 15, the average retail price of tomatoes across India was ₹116.86 per kg, while the maximum rate was ₹250 per kg and the minimum was ₹25 per kg. Modal price of tomatoes was ₹100 per kg.
What is fueling the price increase?
Several factors explain the decline in overall tomato production this year, the two main reasons being the extreme weather conditions and the poor commercial realization of the harvest for farmers in the months before June as well as last year.
Heat waves and high temperatures in April and May, as well as delayed monsoon showers in southern India and Maharashtra, led to pest attacks in tomato crops. As a result, lower quality varieties hit the markets earlier this year, fetching prices to farmers ranging from ₹6 to ₹11 per kg between December last year and April 2023. Many farmers have resorted to selling the crop they had at these prices while some abandoned their crops. This led to a supply shortage. Later, incessant rains in tomato-growing areas further affected the new crop. The fact that July-August is a period of lean production for the tomato, because it is between yields, has aggravated the problem. Reports show that many farmers in Kolar district of Karnataka, which is usually responsible for large tomato supplies, have switched to beans due to the higher prices they fetched last year.
Is this a seasonal issue?
The Center called this sudden and sharp rise in tomato prices a “seasonal” and temporary problem. Consumer Affairs Secretary Rohit Kumar Singh said there is a seasonality to tomatoes, adding that tomato price data for the past five years showed rates had been increasing every year at that time.
However, policy experts over the years, and now the RBI and the National Bank for Agriculture and Rural Development (NABARD), have expressed concern over this high seasonal volatility in tomato prices and its impact on the index. headline consumer price index (CPI). A NABARD study from last month notes that tomato is the most volatile of the three TOP agricultural commodities (tomato, onion, potato). While the weight of the food and beverage component in the combined CPI is 45.86, vegetables make up a relatively small share at 6.04, and TOP products are even less at 2.20. Even with such a low weighting, TOP’s contribution to the overall CPI has been quite volatile. In June 2022, at 8.9%, the tomato had the largest contribution among the 299 products in the CPI basket. There are several reasons for this, starting with the fact that it is more perishable than onion and potato. Supply chain issues related to transporting the vegetable from areas where it is grown to regions where it is not compound the problem. A July 2022 study by ICRIER notes that tomato prices have followed a cyclical phenomenon, with the same situation occurring every other year. The year 2021 has also seen prices drop to as much as ₹2-3 per kg for farmers. This led many of them to grow tomatoes on less land and switch to other crops, resulting in a glut.
How to control volatility?
Policy experts say the high volatility can be brought under control with a few improvements. First, since tomatoes are highly perishable, improving value and supply chains can help solve the problem. An organized value chain involves a market-driven collaboration of a set of entities working in tandem to produce, process, and market products and services effectively and efficiently. An ICRIER study suggests increasing the processing capacity of tomatoes. Building more processing units and linking tomato value chains to processing at least 10% of tomato production into tomato paste and puree during peak seasons, and using them during the lean season when fresh tomato prices spike can be a solution. The development of integrated cold chains was also suggested.
A 2022 study estimated that farmers’ share of what consumers pay for tomatoes is only 32%. It was suggested to eliminate intermediaries and encourage agricultural producer organizations to sell their products directly, as well as to modify the rules of the agricultural market committees in order to reduce commissions and other costs.
Also, tomato yields in India at 25 tonnes per hectare (t/ha) are very low compared to the world average of 37 t/ha. ICRIER suggests encouraging cultivation in structures called poly houses and greenhouses (as is done in many European countries), which can control pest attacks.