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Wastage, transport cost make vegetable farming unviable

The case of India is same as that of China, the transportation cost is accounting for 30% of the price. Wastages are accounting for another 45%.

Updated: May 20, 2011, 09.02 AM IST
India is next only to China in terms of acreage and production of vegetables. India occupies prime position in the production of cauliflower, second in onion and third in cabbage worldwide. Farm land used for the production of major vegetables is estimated at 6.30 million hectare generating an output of around 93 million tonnes.

Interestingly, China is facing a serious social challenge at the moment due to the suicide of a vegetable farmer in Shandong Province. Last year, when vegetables prices surged, farmers cultivated large numbers of cabbages believing that the vegetable could fetch a good price in the coming year. However, it was discovered that no one would buy cabbages because too many people had already grown them and as a result of which the wholesale price had plunged to a low. The despair became too much for a farmer as he watched his cabbages rot and he ultimately committed suicide.

India's daily turnover in vegetables and fruits is about Rs 275 crore. The typical "wastage" per day is around Rs 130 crore. Despite accounting for 15% of world's vegetable production, India has a relatively low global share in exports (1.5%). Small holders dominate Indian vegetable production. The income from staple crops is inadequate and farmers are increasingly supplementing it with off-farm income by growing high-value produce such as vegetables.

In China, despite consistently high inflation particularly in food prices, vegetable prices are dropping bizarrely creating a panic-like situation. Like India, Chinese farmers tend to produce vegetables on a small scale and given the large domestic market, there has been a constant imbalance between supply and demand as a result of which vegetable prices have been subjected to sharp fluctuations since China abandoned planned economy. Farmers in China are getting a low price causing them to abandon the produce while for the city population there is no change in vegetable prices.

A logistic-induced cost accounts for two-thirds of the total cost of vegetables that are transported nationwide.

Out of the transportation cost, payment of highway and bridge tolls (70% of worldwide toll roads are in China) make up as much as a third of the total transport costs incurred.

In recent years, across the various regions of India, planting and labour costs in vegetable farms have been on the rise. In city markets, vegetable and fruit prices remain high.

The increasing costs in the intermediate links in the farm-to-market process have caused this price difference.

While talking about the wastages and the state-of-the-art cold chain solutions, it is often forgotten that the difference between the farm-gate price and shop price is being burnt in the high energy cost in transporting the fresh produce.

The case of India is same as that of China, the transportation cost is accounting for 30% of the price. Wastages are accounting for another 45%. These are significant drags on consumers pocket at a very difficult time and benefits of which do not go down at the producers' level.

The petroleum price increase of Rs 5 per litre has added to the agony of consumers and distributors as transporters are likely to increase tariffs affecting the cost of vegetables in turn.

(The author is Chief Business Officer NCMSL. Views are personal)

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