Rise in vegetable prices is mainly restricted to increase in tomato, potato and onion rates and this has been occurring with almost alarming regularity, according to a report by SBI Research.
“We find that vegetable price increase is primarily restricted to TOP (tomato, onion and potato) and this has been occurring with almost alarming regularity. This means that vegetable price increase has a high concentration risk,” SBI Research said in its Ecowrap report.
It said potato price increase is repeated every 2 years, onion 2.8 years and tomato every 2.4 years.
“We also find that potato and onion crises occur every alternate year. Onion prices possibly follow cobweb model, which explains irregular fluctuations in prices and quantities,” it said.
However, potato prices do not follow any such model, and there is no explanation for this, which clearly implies there may be a possible cartelisation or conscious decision to grow a particular crop in a year by vested interests, the report pointed out.
“If we go by this logic, the next year might see an onion crisis,” it added.
SBI Research said if investigated a little further, it might be found that episodes of pulse and cereal price increase have been repeated every 2.2 years and thereafter.
Further, it said milk and egg, meat and fish, which rarely contributed to food inflation pre-2010, have been instrumental in food price rise since then almost every year.
Pulses and cereals have also mostly appeared in the list in the last decade itself.
It has been observed that the average retail price in Mumbai is 2/3 times more than the wholesale rates, which leads to a substantial margin for the traders.
“Our results show that even at a disaggregated level in Mumbai city, on an average retail vegetable price margins are as much as 4 times (minimum and maximum price difference) depending on the area.
“Interestingly, even for leading online shopping companies, vegetable prices are higher than the local prices,” it added.
The report said there is also little relation with rainfall and the increase in food prices.
For example, it said even though FY01-FY03 and FY05 received less than adequate rainfall, there were hardly any major episodes of food price increases.
“However, in FY10, when rainfall deviation was 22 per cent, food prices did increase, but we should remember that the 30 per cent procurement price increase in the preceding year was a major reason,” it added.