Covid-19 in India: Food prices surge 3 times as supply chain takes a hit

Coronavirus in India: Three main factors are driving food prices higher, according to data from the consumer affairs ministry, as well as a dozen agricultural produce market committees (APMCs), which are state-regulated wholesale points.

The prices of key staples, barring cereals, have surged nearly three times from a month ago because of a noticeable supply shock amid the three-week nationwide lockdown to fight the coronavirus disease (Covid-19) pandemic, according to official and market data reviewed by Hindustan Times.

A vegetable vendor wearing protective face masks waits for customers at a market during a lockdown imposed due to the coronavirus in Mumbai.(Bloomberg)

Three main factors are driving food prices higher, according to data from the consumer affairs ministry, as well as a dozen agricultural produce market committees (APMCs), which are state-regulated wholesale points.

One, arrivals of farm commodities in APMC markets have plunged sharply, down almost 60% in some markets from a month ago, that is, in the first week of March. Two, land transportation costs have risen sharply, as truckers struggle to cross interstate boundaries, despite exemptions from the lockdown. Three, restrictions and quarantine measures have resulted in serious labour shortages, affecting the loading, unloading and sorting of commodities.

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A 10% rise in food prices proportionately hits household budgets in developing nations, according to the UN’s Food and Agricultural Organisation.

On April 8, the Geneva-based International Labour Organisation, in a report, said the coronavirus shutdown in India could shatter incomes of potentially 400 million poor Indians.

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Currently, supply-side factors, such as restrictions and regulations in movement, have caused a spike in food prices. Soon, things could run the opposite way, economists warned, meaning supply shocks could turn into demand shocks.

“Loss of income will lead to a drop in demand for food in the coming months. A possible decline in food consumption could result in malnutrition too,” said Himanshu (one name), an economist with the Delhi-based Jawaharlal Nehru University

On an aggregate basis, price of cereals, such as wheat and rice, are steady, mainly because these are being adequately supplied from state-run granaries.

“Restrictions have impeded farmers’ access to markets, denying outlets of sale for farm produce,” said R Mani, an economist with the Tamil Nadu Agricultural University.

What is clear is that there has been no noticeable fall in winter crop production. Rather, state and federal officials have failed to coordinate supplies and ensure deliveries at the right time and at fair prices.

The Centre has issued advisories on four occasions to freely allow agriculture and linked activities that form the farm-to-fork supply chain, on March 25, March 26, April 2 and April 8.

Yet, broken chains of command are testing the limits of ensuring that the essential needs of 1.3 billion people are met during the lockdown, which was imposed from March 25. States are regulating supplies with permits and only selected agents are being given passes to deliver commodities at farm markets, to reduce crowding and maintain social distancing norms. This permit-driven supplies are a throwback to the Socialist licence raj era predating the 1991 economic reforms.

APMC markets are the nerve centres of the country’s food supply chain, which see a web of daily interactions between producers and food aggregators, large suppliers, auctioneers, transporters and packagers, who collectively act as price setters.

India’s official retail food inflation data for March is due for release on April 13 and will likely reflect this upswing. However, since retail prices are collected by field agents, an activity that has been disrupted by the lockdown, the National Statistics Office has, in a directive, asked its statisticians to adopt novel ways, including telephonic enquiries.

Two commonly consumed vegetables – tomato and onion – offer a representative idea of the supply crunch.

Between April1-6, for instance, Andhra Pradesh’s Mulakalacheruvu APMC market, a tomato hub, received just 60 tonnes of tomato that went for a modal price of Rs 550 a quintal (100 kg each) or Rs 5.5 a kg, according to official data.

Modal price, a type of average, is simply the price point occurring the most number of times during auctions. The retail rate of tomatoes in towns supplied by Mulakalacheruvu ruled between Rs 30-40 kg, a huge mark-up, according G. Sasidhar, an official of the APMC.

In Nashik’s Lasalgaon, Asia’s biggest onion market, arrivals are down by over 80% from a month ago, data from the state-run National Horticulture Research and Development Foundation showed.

In the first week of April, the market saw arrivals of nearly 11,878 quintals of onion, trading at a modal price of Rs 775 a quintal. In contrast, in the first week of March, onion arrivals in Lasalgoan were 73,955 quintals. This is an 83% drop. The average retail price of onions in Chandigarh and Guwahati were Rs 40 and Rs 50 respectively, double their usual rates.

On April 8, the Union home ministry, which coordinate with the states, asked all state governments to invoke provisions of the Essential Commodities Act, 1955, which includes capping prices of any edible item. No state has so far put a price cap on food staples.

Unable to source buyers, farmers are dumping farm produce. “My neighbour had to dump one tonne of chillies and two tonnes of chickpeas because there were no buyers at the mandi,” Amra Ram, a leader of the All India Kisan Sabha, said over the phone from Rajasthan’s Sikar APMC.

Bottlenecks in transportation have weighed heavily on farmers. Federal instructions and orders issued by state administrations are not in tandem, as first-hand reports suggest. India is one economy but many individual markets. Steering all of them in one direction, all of sudden, has been a key challenge, ground reports suggest.

“The home ministry’s orders have not percolated to the ground level even though operators want their vehicles to move. Trucks are still being stopped at various state borders,” Kultaran Singh Atwal, president of the lobby group, All-India Motor Transport Congress, said.

Atwal said once trucks dump their consignments, they are then stuck as state authorities don’t allow them to ply back empty. This problem of one-way traffic needs immediate resolution and has pushed up road transport costs by at least 15%, he said.

“We got 42 kg of rice, five kg of dal [lentil] and two litres of cooking oil from the government. But my three children are eating much less than before because there are no vegetables and fish on their plates,” said Atifa Begum, a resident of North Lakhimpur in the northeastern state of Assam.