Why are tomato prices still high?

Source: The post is based on the article “Why are tomato prices still high?” published in The Hindu on 20^th July 2023.

Syllabus: GS 3 – Indian Economy – Inflation

Relevance: concerns associated with volatility of tomato prices

News: The RBI has recently highlighted that the volatility of tomato prices has historically contributed to the country’s overall inflation levels.

Where are tomatoes grown in India?

Andhra Pradesh, Madhya Pradesh, Karnataka, Odisha, and Gujarat, contribute nearly 50% of the total tomato output.

Tomatoes are grown both as rabi and kharif crops. However, some regions in Maharashtra and Himachal Pradesh’s Solan can also grow tomatoes during the monsoon months.

During the summer, Andhra Pradesh’s Madanapalle area alone accounts for all tomato production in the country. 

Further, the peak production of tomatoes was recorded in 2019-20 at 21.187 million tonnes (MT). However, it has been declining since then.

Why are the prices of tomatoes high?

First, the production of tomatoes has been low this year due to the extreme weather conditions. The farmers have also grown less tomatoes due to the low profit received from tomatoes in the previous year.

Second, delayed monsoon precipitation in southern India and Maharashtra, caused pest attacks on tomato crops. Hence, lower-quality varieties appeared in the markets earlier this year. Due to which farmers received lower profit on the crops.

While some farmers sold tomatoes at cheaper rates, others abandoned their crops, resulting in a supply shortfall.

Third, continuous rains in tomato-growing regions affected the new growing crop. Prices rose even more because the months of July and August are typically times of lower tomato production.

Fourth, due to higher profits, several farmers in Karnataka’s Kolar region, who are known for substantial tomato production, moved to other crops such as beans.

How has the government responded to the rising price of tomatoes?

As per the government, the rise in price of tomatoes is seasonal and a temporary issue. The Consumer Affairs Ministry added that the price increase is a seasonal issue and that tomato prices have increased in these months during the last five years.

What is the impact of rising tomato prices?

The RBI and the National Bank for Agriculture and Rural Development (NABARD) are concerned over high seasonal price volatility of tomatoes and its impact on the overall Consumer Price Index (CPI).

Although TOP commodities only make up 2.20 of the CPI basket’s weight, their contribution to the total CPI has been volatile, resulting in higher overall inflation.

For instance, tomato’s contribution to the CPI basket in June 2022 was 8.9%, making it the highest of the 299 commodities.

Additionally, an ICRIER analysis found a cyclical trend in tomato pricing, with similar events taking place every other year.

How can volatility be managed?

Read Here: Volatility in Tomato, Onion and Potato (TOP) prices  – Explained