Prices of some of the essential vegetables like onion, brinjal, ginger, okara, tomato (hybrid), cauliflower and cabbage dropped in 2014-15 against 2013-14 in the wholesale mandis, but their prices at the door-step of housewives rose rather sharply, highlighted the data captured by the ASSOCHAM research.
Similarly, the gap between Wholesale Price Index (WPI) inflation and the level measured by the Consumer Price Index (CPI), has been increasing pointing towards supply chain inefficiencies and too many layers of traders and vendors.
Take for instance onion, its prices dropped by a good 32 per cent in 2014-15 over the previous year in the wholesale mandis, but in the retail market these were sold at 28.9 percent higher. Likewise, the retail prices of other vegetables moved in the contrarian direction to their price tags in the wholesale markets. These include ginger which increased by 16.4 percent at retail, after dropping by over 18 percent at the wholesale, brinjal long that increased by 15.4 percent at retail against decline of 18.9 percent in the wholesale, okra shot up by 11 percent at retail as compared to downward movement of 10.9 percent. Other trends are similar in nature: tomato hybrid, up 10.5 percent in retail but down by 10.7 percent in wholesale.
Similar is the trend in several other vegetables and some of the other consumer food items. “Our research clearly points to inefficiencies and extra layers of supply chain that adds to avoidable costs at the retail level. The use of modern supply chain managed by organised firms but involving the local vendors is the key to structural changes which are required if we want to deal with the issue of inflation,” ASSOCHAM Secretary General DS Rawat said while releasing the ASSOCHAM paper on “Vegetables Retail and Wholesale Price Discrepancy”.
On an average in India wholesale price of vegetables have declined by 6.8 percent during 2014-15 as against 2013-14, but the problem lies at the retail level where the drop is not reflected, barring some, adds the study.
Overall, the gap between consumer price inflation and wholesale price inflation has recorded upward trend during 2014-15 as compared to the previous year. Quarterly inflation gap between consumer price inflation and wholesale price inflation has recorded 2.3 percent in Q1 2014-15, 3.5 percent in Q2 2014-15, 4.6 percent in Q3 2014-15 and 6.5 percent in Q4 2014-15.
The prime concern is that despite moderation in the both level of inflation, overall gap for the whole year has increased significantly. Especially Q4 2014-15 indicates an alarming situation where the gap between consumers price inflation and wholesale price inflation.
On an average in India, retailers are selling vegetables at more than 49.2 percent of the wholesale prices of vegetables. In the last quarter of 2014-15 vegetables prices, it indicates the retailers are charging even more than the average of 2014-15. During January to March 2015, retailers are selling vegetables at more than 52.2 percent of the wholesale price, adds the study.
The paper noted that at a time when the unseasonal rains have damaged the crops which may reflect in the inflation during the next few months, the operational problems and the gaps between the WPI and CPI need to be addressed urgently by taking structural reforms such as dismantling the APMC laws across the states.