FACT CHECK

Potato Price Fluctuation: The Missing Facts from ‘The Wire’ Series

Potato

The Wire has been running a series of articles about the reported issue of farmers’ distress due to a fall in the price of the potato. It has criticised both the Central and Uttar Pradesh governments in these articles, such as the following two: Demonetisation Triggered the Current Crisis in UP’s Potato Market and Uttar Pradesh’s Hot Potato: Another Farm Crisis Ignored, both of these articles written by Kabir Agarwal.

KEY TAKEAWAYS
  • The Wire’s articles allege that despite knowing the problem, both the state and Central governments have failed to address the crisis that UP’s potato farmers are facing.
  • But The Wire completely ignores the Centre’s perhaps first-of-its-kind efforts, such as establishing the Price Stabilisation Fund mainly for potato, onion and tomato.
  • The Wire makes a sceptical reference to recent budgetary measures to help farmers, such as the Rs 500 crore “Operation Green” and other steps taken to strengthen market infrastructure.
  • By completely ignoring the price variation history of potato and linking the present price fall to demonetisation, The Wire appears to incorrectly imply that the potato crisis is a new phenomenon under the present government.
GENESIS OF THE POTATO PROBLEM

Every government has historically appeared to face a dilemma with regard to potato, since what is needed is a twin focus to see to the interests of both farmers and consumers.

When there is a bumper potato harvest like this year’s, farmers are often forced to sell their crop at lower rates. When potato production decreases, the government again comes under pressure, because then it is the turn of the consumer to complain about price spikes since potato is a staple food across India.

Moreover, the international market also comes into play as India’s neighbouring countries like Pakistan and Bangladesh are also potato-producing countries. This explains the constant tweaking of various policies with regard to potatoes.

There is usually the Minimum Export Price (MEP) when the country witnesses a low yield of potatoes to avoid shortage in the domestic market. Earlier, the MEP of US$450/ MT on potato had been imposed on June 26, 2014. But keeping in view the surplus supply of potatoes in the domestic market and the consequent rapid fall in price (In domestic and retail), the MEP on export of potato was removed in May 2015. Thus, the current administration would appear to be taking measurers, with whatever is at its disposal, to address the so-called potato problem.

However, before listing the concrete steps taken by the present administration, it is necessary to debunk the impression created that this “crisis”, as reportedly reflected in UP farmers dumping potatoes on roads, is a first-of-its-kind.

PAST INSTANCES

In March 2013, when the question was raised in Lok Sabha about remunerative prices for potato growers, the previous government had said the following in reply: “the prices of potato are governed by market forces of demand & supply and depends upon a host of factors which influence production and arrivals in the market.

What was the mechanism to stabilise the potato price then? Various replies to Parliament on this issue provided an explanation that there is a Market Intervention Scheme (MIS) for the procurement of agricultural and horticultural commodities which are generally perishable in nature. The MIS is implemented on the specific request of the state government which is willing to share the loss on the implementation of the scheme with the Central government on a 50:50 basis (in case of Northeast states, the ratio is 75:25). However, the losses are restricted to the 25% of the procurement cost or actual loss, whichever is less.

When we juxtapose this against the various steps taken by the present government, the efforts are evident. But before considering those, it is important to check what was previously reported in the public domain by the media, for instance, about potato price fluctuation at different points in time. Below are some samples:

If The Wire attributes the present fall in potato prices to demonetisation, going by the above reports with 2012 and 2011 datelines, one may ask what kind of demonetisation was in place that time or had preceded the events?

Below is another report, from 2013 this time, which discusses and attempts to explain the plight of West Bengal’s potato growers due to a bumper harvest.

THE MEASURES TAKEN

As the above instances show, potato price fluctuation appears to be a longstanding problem and there are various factors at play. Therefore, it may not be judicious to expect or produce a quick-fix. Nevertheless, many first-of-their-kind measures have taken by the present administration to address this issue.

Some of these, such as reforming market infrastructure, will obviously take some time to yield results. The major steps are listed and explained below:

  • In March 2015, the Price Stabilisation Fund (PSF), a Central Sector Scheme being implemented by the Department of Agriculture & Co-operation (DAC) with a corpus of Rs 500 crore, was approved. The scheme helps in regulating price volatility of both agricultural and horticultural commodities when there is a price rise or fall. Initially, the support was for the procurement of onion and potato.
  • In July 2014, the government included onion and potato under the purview of stock-holding limits under the Essential Commodities Act, 1955. This was to empower the state governments to undertake de-hoarding operations and control the prices of onions and potatoes.
  • As pointed out earlier, the government also tweaked export-import policies of potato to safeguard farmers’ interest.
  • In Budget 2018, many measures have been announced which are likely to go a long way to address the issue. Especially, the expansion of marketing infrastructure will help many farm products, including potato.
  • Rs 500 crore for ‘Operation Green’ was announced to address the price volatility of perishable commodities like potato, tomato and onion and benefit both producers and consumers.
  • 22,000 rural haats are to be developed and upgraded into Gramin Agricultural Markets (Grams) for farmers to directly sell to consumers and bulk purchasers.
  • A Rs 2,000 crore fund is to be set up for developing and upgrading agricultural marketing infrastructure in the 22000 Grams and 585 APMCS.

 

Therefore, to assess and understand the potato price fluctuation phenomenon in India, a comprehensive perspective is needed, taking into account the complete picture. Unfortunately, that is precisely what seems to be missing from The Wire series.