Explained | Why are tomato prices still high?

Consumers wait in a long queue, braving the rain, to buy tomatoes at a subsidised price at the MVP Rythu Bazaar, in Visakhapatnam on July 18.
| Photo Credit: DEEPAK K. R.

The story so far: As prices of tomatoes hover between ₹100 and ₹200 in various parts of the country, the Reserve Bank of India’s latest monthly bulletin has highlighted that the volatility of tomato prices has historically contributed to overall inflation levels in the country.

How is tomato produced in India?

Tomato production in the country is concentrated regionally in the States of Andhra Pradesh, Madhya Pradesh, Karnataka, Odisha, and Gujarat, which account for close to 50% of total production, according to Ministry of Agriculture and Farmers Welfare figures. There are two major crops of tomato annually — kharif and rabi. The rabi crop hits the market between March and August annually while the kharif crop comes to markets from September. Some regions in Maharashtra and Himachal Pradesh’s Solan are able to grow tomatoes during the monsoon months, while in the summer, Andhra Pradesh’s Madanapalle region alone accounts for tomato cultivationin the entire country. As for tomato production, it peaked in 2019-20 at 21.187 million tonnes (MT) and has been declining since. In 2021-22, it dropped to 20.69MT and 20.62MT in 2022-23.

How much have tomato prices soared since last month?

In late June, prices of tomato doubled in retail markets within a day. According to data from the Consumer Affairs Ministry, pan-India modal price (rates at which most trades take place) in retail markets jumped to ₹40/kg on June 25 from ₹20/kg on June 24, probably the maximum rise in a single day.

In the first 24 days of June, the modal price was ₹20 per kg. In the last week of June, the modal price surged to over ₹50 per kg. On the last day of the month, it peaked at ₹100 per kg.

As on Saturday, July 15, the average all-India retail price of tomatoes was ruling at ₹116.86 per kg, while the maximum rate was ₹250 per kg and the minimum was ₹25 per kg. Modal price of tomatoes was ₹100 per kg.

What is fuelling the price rise?

There are multiple factors for the dip in overall tomato production this year, with the two key reasons being extreme weather conditions and low commercial realisation of the crop for farmers in the months before June as well as last year.

The heatwaves and high temperatures in April and May along with delayed monsoon showers in southern India and Maharashtra led to pest attacks in tomato crops. As a result, inferior-quality varieties came to markets earlier this year, fetching farmers prices ranging as low as ₹6 to ₹11 per kg between December last year and April 2023. A lot of farmers resorted to selling whatever crop they had at these prices while some abandoned their crops. This led to a crunch in supply. Later, incessant rains in tomato-growing regions further affected the new crop. The fact that July-August is a lean production period for tomato, as it falls between yields, compounded the problem. Reports show that many farmers in the Kolar district of Karnataka, which is usually responsible for sizeable tomato supplies, shifted to beans owing to the higher prices it fetched last year.

Is it a seasonal issue?

The Centre has called this sudden and sharp price rise in tomatoes a “seasonal” and temporary issue. Consumer Affairs Ministry Secretary Rohit Kumar Singh stated that there is a seasonality to tomatoes, adding that the data on tomato prices of the last five years showed that the rates had risen every year at this time.

However, policy experts over the years, and now the RBI and the National Bank for Agriculture and Rural Development (NABARD), have expressed concerns over this high seasonal price volatility of tomatoes and its impact on the overall Consumer Price Index (CPI). A NABARD study from last month notes that tomato is the most volatile out of all the three TOP (tomato, onion, potato) agri-commodities. While the weightage of the food and beverages component in the combined CPI is 45.86, vegetables account for a relatively small part of this at 6.04, and the TOP commodities are even lesser at 2.20. Even with such a low weightage, the contribution of TOP to the overall CPI has been quite volatile. In June 2022, at 8.9%, tomato had the largest contribution among 299 commodities in the CPI basket. There are multiple reasons behind this starting with how it is more perishable than onion and potato. Supply chain issues in transporting the vegetable from areas where it is grown to regions where it is not compound the problem. A July 2022 study by ICRIER notes how tomato prices have been following a cyclical phenomenon, with the same situation arising every alternate year. The year 2021 also saw prices drop to as low as ₹2-₹3 per kg for farmers. This led to a lot of them cultivating tomatoes in lesser land area and shifting to other crops, which resulted in a glut.

How can volatility be controlled?

Policy experts say high volatility can be tamed by making some improvements. First, since tomato is highly perishable, improved value and supply chains can help with the problem. An organised value chain involves a market-focussed collaboration of a set of entities working in tandem to produce, process and market products and services in an effective and efficient manner. An ICRIER study suggests increasing the processing capacity for tomatoes. Building more processing units and linking tomato value chains to processing of at least 10% of tomato production into tomato paste and puree during peak seasons, and using them in the lean season when fresh tomato prices spike can be a solution. The development of integrated cold chains has also been suggested.

A 2022 study estimated that farmers’ share of what consumers pay for tomatoes is only 32%. Eliminating middlemen and encouraging Farmer Producers Organisations to sell produce directly, as well as amending rules of Agricultural Produce Market Committees to reduce commission and other fees has been suggested.

Besides, tomato yields in India at 25 tonnes per hectare (t/ha) are very low when compared with the global average of 37 t/ha. ICRIER suggests encouraging cultivation in structures called poly houses and greenhouses (as done in many European countries), which can control pest attacks.