Mar 30, 2010

How the food prices are manipulated

You have been witness to a stupendous rise in food prices. Some say that the price rise has broken a 10-year record. You have also heard the Prime Minister, Finance Minister, Food Minister and the deputy chairman of the Planning Commission repeatedly telling the nation that prices will come down in 2 to 3 months time. You have probably even lost count of how many times they said so.

You have also been following the daily reports about price rise in the newspapers. Popular TV channels have been holding special programmes on the food spiral. More often than not you have come across party spokespersons fighting it out in the TV studios. But none of the TV channels and the print media took you to where the real action is.

I am talking about a visit to the wholesale market.

I was therefore delighted to read a newsreport by two young and enterprising reporters Vikas Kumar and Abhishek Kumar of The Sunday Indian magazine who actually took the trouble of taking a walk in the Azadpur mandi. This is what they say: "A walk in Azadpur Mandi in Delhi, one of the biggest wholesale markets of fruits and vegetables, is not the most enchanting experience but it opens one’s eyes. Here one comes face to face with reality, the murky world of arhatias, commission agents and traders who are ready to take hapless farmers for a ride. No market theory can explain this phenomenon."

So when Montek Singh Ahluwalia says that price rise has benefitted the farmer, you know who is he trying to cover up. If only the government had cracked down to break the nexus at the country's big wholesale markets, prices would have come tumbling down.

The reporters learnt firsthand what I have been saying for long. The price rise had nothing to do with the supply demand constraint. It was simply the outcome of price manipulation. This is what The Sunday Indian digs out: "There are approximately 5,000 licensed commission agents in Delhi which include 1000 big commission agents. Having established monopoly in the market, they have created an elaborate nexus. They have employed vegetable retailers at monthly salaries and supply vegetables in the residential areas."

“They are supposed to deal with wholesale trade only but the reality is that some of them also control the retail trade. I cannot take action against them as they are very dangerous. One more question that needs to be investigated properly is that when prices of food products are rising steeply, how revenues of most mandis are falling,” says another top official of a mandi on the condition of anonymity. The number of fake commission agents is huge," the news report quoted an official on assurance of anonymity.

In addition to the wholesale-retail nexus, I have also been calling for a strict action against the Big Retail. They came to India on the assurance that they will buy directly from the farmers and by squeezing out the middlemen, will sell cheaper to the consumers. Nothing like this happened. In reality, the Big Retail behaved like the small hawkers and exploited the situation to the hilt. They made Big Money.

"Even Mother Dairy and Safal outlets are busy making money by selling vegetables and fruits at even higher prices. Mother Dairy, a wholly owned company of the National Dairy Development Board, had been established to support farmers by purchasing directly from farms and supplying to consumers without the added expense of middlemen. However, we found that prices at various Safal outlets in the city were higher than those at local retailers’. The obvious question arises that if Mother Dairy is not benefiting either farmers or consumers, then why is the government doling out subsidies to the entity?"

But then, the problem is that the government is hand-in-glove with the retail trade. Even the small hawkers -- the rehriwallas -- have formed local unions, and if their leaders have to be believed these unions also fund the political parties.

You can read the complete report entitled "The true story of rising prices" published in The Sunday Indian (April 4, 2010) at:

This is merely a tip of the iceberg. If you want to know more, I suggest you take a walk or a series of walks through the Azadpur and Okhla mandis in Delhi. Be a citizen journalist and investigate for yourself. If your report is not picked up by TV channels, you can send it to Ground Reality.

And now a simple riddle. Have you ever thought why the prices of eggs, whether you buy in Delhi or Mumbai or Bangalore or in Ludhiana, are almost the same? How come the poultry hens cater to the demand of the city -- and I am sure the city varies in numbers -- in a manner that the prices should remain the same? Shouldn't they vary depending upon what the economists call as the demand and supply factor? And also because of the transportation cost, shouldn't the price of eggs differ from place to place?


Fearless said...

Thanks a lot for giving encouragement. Few months ago i travelled extensively to Punjab for 7 days for thousands of miles. What i found there disappointed me. Punjab gives semblance of prosperity at the first site with big bunglows made in fields and lot of Mercedese Benz running on villages. But, when i dug further, i found something very-very disturbing. People of Punjab particulary the young generation is no more interested in agriculture. He wants to shift abroad, want to invest in malls etc. What is happening is that migrants population is increasing and they are taking care of agriculture. But, they do not have investing power however those who have acquired investing power have lost interest to invest in agriculture. So, though people from lower strata are going up in economic chain at the same time it deprives agriculture from next generation innovations and thus i guess agriculture will not progress in the 20-40 years to come unless something very drastic steps are taken.

Vikas Kumar
The Sunday Indian

Smudged Kohl said...

Excellent expose. Economists need to wake up to their own foolishness, that their theories do Not dictate a darn thing about the real world.

Alex said...

I am interested in the riddle's answer. Economists proclaim that excess demand/supply shortage is the cause of price hike and they leave it at that.

So, how is the market for eggs? Are the intermediaries very less? Or is it monopolised throughout the country?