Transformation of current unorganized agri General Trade (GT) Fresh (F&V) business sector of India: challenges and approach
Abstract
Onion is commonly used vegetable in India and many countries worldwide. It is also one
of the interesting commodities when it comes to price discovery, volatility in price as
compared to other commodities, demand, and supply dynamics in India. Variation in
price of onion have a huge impact on consumer, farmer and overall food security. A
decrease in price of onion below the cost of production affects the farmer and the
ecosystem around it whereas increase in price affects the consumer as it shoots the
price consumption budget. The reason for high inflation in price in case of onion is not
always due to mismatch between demand and supply or some exogenous shocks but
could be due to various natural and artificial factors such as market inefficiencies,
broken supply chain, climatic conditions, monopolies in the market etc.
With this context we undertook this study to understand the above aspects and other
market dynamics of onion supply chain that led to inefficiencies, explore various
business models and recommend some best practices or policies that could potentially
solve this problem.
For this study, Primary data is collected by interviewing with traders and wholesalers
across mandis of Odisha, UP, Bihar, West Bengal, Delhi, Karnataka, and Maharashtra.
Secondary data is also collected from various public sources such as Agmarknet Portal
(Directorate of Marketing & Inspection (DMI),Ministry of Agriculture and Farmers
Welfare, Government of India, 2022), AgriXchange (AgriXchange, 2021), National
Horticulture Research and Development Foundation (National Horticulture Research
and Development Foundation, 2021) etc.
Both Primary and Secondary data was analyzed using Statistical methods.
Significant Observations from our study:
• Wholesale price and quantity arrival for market are interlinked. We have
observed that for APMC markets wholesale price decreases if arrival quantity
increases and vice versa. However, for non-APMC markets wholesale price do
not decrease even if the arrival quantity increases. The possible reason could be
that APMC market are regulated whereas in non-APMC market, the market
forces and other factors strongly drive the price.
• Export of onion from India are regulated and government introduced Minimum
export price (MEP) to regulate the domestic prices and the safeguard the
domestic consumers. MEP was introduced in onion export during 2010 however
Government has waved off and re-imposed MEP several times in last few years.
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• Minimum Export Price (MEP) and Export impact the domestic onion price. Based
on our analysis, we have observed that if MEP increases, exports quantity
decreases leading to increase in domestic quantity and reduction of domestic
onion price.
• Seasonality plays a role in domestic price of onion as well. We have observed
that domestic price is at the higher end towards the end of the year even though
the production and availability of onion is high due to festive, marriage occasions
where demands go up significantly.
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