RBI research says onion farmers get 36% of consumers' spend, pitches for futures trading, private mandis

Mumbai: A Reserve Bank of India research paper has suggested reforms in agricultural marketing, including increase of private mandis to help farmers realize better value for their produce.

The paper on vegetable inflation studying Tomato, Onion and Potato (TOP) prices noted that onion farmers get only 36 pc of consumers' spends, for tomato it stood at 33 per cent and for potato it was 37 per cent.

"As vegetables are perishable commodities, private mandis may be increased to improve transparency in marketing of TOP vegetables," the paper said, adding that the competition may also help improve the local-level agricultural produce market committee infrastructure.

The research suggested that there is "a significant negative relationship" between monthly availability/availability to usage ratio and consumer price inflation of the three vegetables, while controlling for other factors like input costs, rainfall and wages.

It can be noted that the recent pressures on headline inflation have been attributed to food inflation and within that the volatile TOP vegetables have been the most challenging.

The research done by staffers in the Department of Economic Research (DEPR) along with external authors found that the e-national agricultural markets (e-NAM) should be leveraged to help reduce the current inefficiencies in the markets, which will lead to increase in prices received by farmers and also reduce the prices paid by the consumers.

It pitched in favour of promoting more farmer produce organizations in the TOP vegetables and also launching futures trading in onion especially for the winter crop for optimal price discovery and risk management.

The paper also made other suggestions on the storage of the TOP commodities, their processing and ways for enhancing productivity.

Meanwhile, a similar study on pulses inflation focusing on gram, tur and moong said around 75 per cent of the consumer rupee spent on gram (chana) circulates back to farmers, the share is around 70 per cent for moong and 65 per cent for tur.

The RBI clarified that the views in the papers are not of the institutions to which the authors belong, and added that these papers represent research in progress.