Corruption is... Biz & Economy

Food Prices Fluctuating? The Problem Is In The Supply Chain


Ever wonder why “Bhaiya, kanda kitne mein diya?” is a line you hear most at a grocery cart? Why is everyone always stressing about the rise and fall the price of onions, tomatoes, dal, sugar?

Well, around the world, it’s got to do with supply and demand. Since the agricultural sector is so erratic – sometimes the farms have a great yield and sometimes not so much – but the number of people buying the food is not, food prices must adjust to the market. Floods, droughts, pest attacks and crop diseases can tremendously affect production. When the market faces a shortfall in supply, it creates a panic among the consumers. This causes consumers to offer higher prices for the same product as all of them desire purchasing it and try to outbid one another.

However, in India, there is another element that causes the rise and fall of food prices – CORRUPTION. From the seed, all the way to your kitchen. Let’s have a closer look.

1. Buying The Seed

Agriculture accounts for 23% of the Indian economy making it one of the biggest industries in India. Farmers receive support for the Central and State Governments in subsidies and loan waivers. Seeds and fertilizers are some of the most subsidies products making it a victim of corrupt middlemen. In 2017, 18 Agriculture department officials in Kerala faced prosecution for procuring low-quality seeds at an amount of Rs. 13.65 crore. The damages caused to the farmers are hard to estimate. Similarly, in 1996, a Fertilizer Import scam has uncovered that cost the Government of India Rs. 1,300 crores. Such scams heavily affect the farm produce as the fertilizers don’t reach the farmers in time.  A poor produce leads to less supply, thus inflating prices.

Another major problem with the Indian agricultural industry is that most farmers don’t own the land they cultivate which causes them to pay exorbitant amounts as rent. This too adds up to the final cost, making your favorite food pricier.

2. Cultivating The Land

Droughts are not a new phenomenon in India. States like Maharashtra, Panjab, Haryana and Uttar Pradesh often suffer from scare rainfall. Irrigation is key for agriculture in these states. In 2009, Loksatta reported the Rs. 1,385 crore Maharashtra Irrigation Scam. It was accused that politicians and contractors pocketed half of the entire budget for the irrigation program. This caused the irrigation programme to barely archive 35% of its original target. In many parts of Maharashtra, like Vidharbha, farmers are forced to pay bribes for water supply lines.

Pesticides are another key element in farming. There have been numerous occasions where either sub-par pesticides or no pesticides were delivered to farmers.  In 2015, the State Of Panjab suffered a Rs. 6.83 crore loss after the head of the agriculture department purchased pesticides at an expensive cost for supposed kickbacks. Such events leave crops vulnerable to pests and diseases caused a downfall in produce.

3. Harvesting The Crop

If the crops survive the atrocities caused by corruption so far, it is time for them to be harvested. Harvested crops often find themselves all over the place due to lack of proper transport facilities. Transport companies are often paid on weight load and transport time. This leads to deliberate underloading and motivates the drivers to travel slower for higher remuneration. Expensive transport costs get added up in the final price. Another major issue with the Indian Food Transport Industry is the lack of temperature control. Unfavorable temperatures during transit cause huge amounts of spoilage. Thousands of tons of fresh food end up in landfills due to this. The government often pays farmers and dealers for goods lost to such problems. Dealers and wholesalers often hike prices to make up for these losses even after they receive remuneration from the government for the same. Many times, fake spoilage is reported to embezzle money from the state.

4. Storing The Product

The lack of warehouses in India isn’t new news. Every year the government announces resources for development and maintenance of warehouses. A huge chunk of this money disappears before it reaches the targeted cause. Shady politicians and middlemen lay the groundwork for this money stealing nexus. While maintenance is shown on paper, the ground reality is completely different. Government warehouses are often filled with mice and pests which destroy a huge part of the stored produce. An RTI reply revealed that around 62,000 tonnes of food grains, mainly rice and wheat have been damaged in the godowns of the Food Corporation of India (FCI) in the last six years with Maharashtra topping the list of states.

Another huge problem is hoarding. Distributors and storekeepers often hoard goods to create a shortfall in the market. The panic created by shortened supply causes the prices to skyrocket. In August 2017, the price for onions touched around Rs. 100 due to a sudden scarcity in the market. Such situations allow the dealers and wholesalers to pocket huge profits.

5. Selling The Food

Once the food is in the market, it is vulnerable to a million forms of corruption. Ration shops often replace the government supply with sub-par products to sell the former at higher prices in the black markets. This deprives a significant number of people of quality food while another section of society is overcharged for a basic meal. Another technique to make money is adulteration. Government standard cooking oil is often mixed with cheap palm oil to increase the batch quantity. When the market is flooded with such low-quality products, standard quality food is sold at a premium, making sellers a profit out of your pockets.

By the time the food gets to your fridge from the farm, it is subject to several corruption actions. While the government tries to fix it, many of the perpetrators of these scams are a part of the government itself. It would take a complete overhaul of the current food supply chain to bring reasonable and significant change in the system. Till then, you shall overpay.

Food Prices Fluctuating? The Problem Is In The Supply Chain was last modified: by
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