Vegetable prices: Why the middle men deserve the hatred they get

Earlier this week, newspapers said the price of tomatoes had dropped to Rs 3 per kg in the wholesale market in Vashi, Navi Mumbai, from where they find their way to the consumers. That time, I paid Rs 18 per kg in Thane, barely 30 km away. A difference of Rs 15! That explains why the consumers hate middlemen so much.

But they cannot do much about it but crib. The prices dropped progressively to Rs 10 at an air-conditioned super store of a chain. We do not know if the chain had sourced it via a middleman or directly from the farmers. But the difference outside persists. At every transaction prior to and including the final one in which the housewife is engaged in, there is a mark-up.

 Vegetable prices: Why the middle men deserve the hatred they get

Costlier vegetables. AP

Those mark-ups are what keep many people in income, and from what one knows from anecdotal evidence, the middlemen in wealth. The Agricultural Produce Market Committee, Vashi, has agents who are known to regularly buy chunks of gold on their way home because such wealth is easily stashed away.

Little wonder then that the other day, the commission agent in Vashi just picked up the crates of tomatoes that farmers had directly brought for sale because that cut them out of the deal. Of course, the farmers, disorganised as they always are, can make this a once-in-a while event. They cannot run up and down and sell cheap.

Andhra Pradesh, during Chandrababu Naidu's term, had found a nice way of cutting out the middlemen and keeping both the farmers and the consumers happy. It worked like this: the farmer could come to any Rayatu Bazaar-raytu being a farmer in Telugu-in the city, in this case, Hyderabad, take a place and sell directly to the consumer. The bazaar had stalls which were not pre-allotted.

The prices at which they sold vegetables and fruits were higher than the wholesale rates of the day and the housewife got it much cheaper than she would from any other retailer. Both benefited: the farmer did not need to go into long-term contractors with the middleman which was not beneficial to him. The middleman can wreak havoc which hurts both the producer and the consumer.

The wholesale market's prices are conveyed to the farmers in the first few minutes of their opening and then they fix their prices. The wholesale market, surprisingly, co-exists, mainly because the cities are too large and spaces for the raytu bazaars are few and far between. Private real estate is far too expensive to add to their numbers and make it the only way of selling and buying the green grocery cheaply.

The way the middlemen work their tricks is amazing; everything tilts their way for they have what is called the 'staying power', which is the ability to make the producer blink first. In May, despite or because of a good crop the agents in Banda in Uttar Pradesh's Bundelkhand region, refused to buy to push the prices down. The refusal starved the retail markets which would then be ready to accept higher prices.

The farmers flew into a rage, partly perhaps because of their helplessness because the ordained chain is grower to middleman to next middleman to the local middleman to the retailer, each transaction involving a mark-up. In Banda, the wheat growers who had faced six years of water scarcity fired at the middlemen. That, however, did not change the rules: the market operates very much the same way.

One should remember how when desperate onion farmers who could not realise the cost of transport to the Asia's largest onion wholesale marker, Lasalgaon in Nashik district, would dump it and run away, the markets in towns and cities did not always sell at rock bottom prices. The retailers argued about the middlemen even in seasons of plenty.

The other day, my wife, who teaches economics, and had stopped by at the Thane's main vegetable market from where retailers too source their day's share, said she was told how there existed another set of middlemen who help jack up the prices. They are the constables and petty officials of road transport and other departments.

They would wave a truck down, ask for a Rs 100 currency note, and then proceed to the next stop of extortion. These, the elderly wholesaler who had bought from Vashi , are the "official beggars" and no one had factored in how they contribute to the mark-ups and higher prices for the consumers. This means, the number of tiers for pay-offs had gone up on commodities which are not to pay, by policy, octroi.

The Andhra model which survives even now has not had any takers anywhere. Nor has the consumer cooperative movement in Mumbai caught up elsewhere. As for the first, two Maharashtra ministers went to Andhra Pradesh to study the raytu bazaars and nothing came of it. At that time, the deputy chief minister was Chhagan Bhujbal who had started off as a vegetable agent in Byculla.

The second model requires committed people. It is the Grahak Panchayat where households have to register their grocery requirements, and their needs are bought in bulk combining the similar monthly requirements of others. These are at wholesale rates, often from distant places where the prices are lowest.

They are then distributed in bulk to each housing society where the disaggregation takes place. This calls for work. Without which prices cannot be beaten down.

The alternative is to whine.

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Updated Date: Dec 21, 2014 04:55:55 IST