Veg prices peak most since NDA came to power

This could be the reason why Prime Minister Narendra Modi mentioned tomato, onion, and potato as his government’s ‘TOP’ priority, in an election rally on February 5 in poll-bound Karnataka. 

Wholesale prices of tomatoes and onions saw their highest rise in November and December, respectively, last year, after May 2014, when the National Democratic Alliance came to power at the Centre.

The wholesale price index (WPI)-based inflation rate for onions touched 197 per cent in December while that for tomatoes remained high at 136 per cent, down from the peak of 270 per cent in November.

The previous peaks in WPI inflation for onions (375 per cent) and tomatoes (155 per cent) were observed in October 2013, months before the United Progressive Alliance went out of power. Retail prices of vegetables, too, rose fastest -- at 30 per cent --  in December last year after May 2014. 

This situation of rising vegetable prices is very similar, but under control as of now, to that in September-October 2013, when consumer inflation for vegetables had touched 70 per cent. This could be the reason why Prime Minister Narendra Modi mentioned tomato, onion, and potato (TOP) -- the three essential vegetables in an Indian’s food plate --  as his government’s ‘TOP’ priority, in an election rally on February 5 in poll-bound Karnataka. 

Karnataka is the second-highest producer of onions and tomatoes in India, making it imperative for parties to assure better prices to farmers growing them in the state.

While onion prices are expected to stabilise by May owing to higher anticipated volumes of arrivals, they are expected to rise in the June-September period, agents in vegetables supply chains say. Vegetables have a weight of about 7.5 per cent in the consumer price inflation index. The heightened inflation is partly owing to the base effect, meaning subdued prices last year.

Onion farmers in Lasalgaon, Maharashtra -- the biggest onion market in India -- are happy because the gains this winter have made up for their losses in the past few years. 

“We expect better prices for farmers in the coming year especially since incomes of farmers and small traders have been negative in the past five to six years,” said Sourabh Sanap, an onion farmer and wholesaler in the town. 

“The first two onion crops of the year --  kharif and late kharif -- were sown in smaller areas, and the irregular monsoon affected the harvest and arrivals in market. This inflated wholesale prices,” P K Gupta, director, National Horticulture Research and Development Foundation, told Business Standard.

“The rabi (winter) onion crop has been sown on a larger area this season. It will ensure good supplies till May, which will push wholesale prices downward. But at the same time, the recently scrapped minimum export price will most probably hold prices up,” Gupta added. 

Wholesale prices of onions remained at Rs 2,500-3,000 per quintal in Belgaum, northern Karnataka, giving a better remuneration to farmers, while those for tomatoes were subdued in the range Rs 250-350 at Kolar, the district producing the highest amount of tomatoes in Karnataka.

Daily consumption items -- be it vegetables or fuel -- influence public perceptions about inflation, experts say. Retail petrol and diesel prices have risen 7-8 per cent in four months since the cut in the excise duties in October, and are making headlines. 

In the Budget, the government allocated Rs 5 billion – for Operation Greens -- to promote farmer producer organisations, logistics, processing facilities, and professional management.  

“Prices of essential vegetables are rising due to increased costs owing to the proliferation of grading and packing, increased labour charges, and transport,” Brajendra Singh, deputy managing director, National Horticulture Board, told Business Standard.

Potato, however, has been an outlier as it had been in the 2013 price upswing as well. WPI inflation for potato was minus 8 per cent in December. 

“Potato farmers are not getting remunerative prices this season,” said Singh.

Photograph: Vivek Prakash/Reuters.