After a steady decline, prices of essentials shoot up amid lockdown

The retail prices of vegetables, pulses, edible oils and several other essential commodities have shot up during the nationwide lockdown announced by the Centre. While the price hikes range from 3.5 to 28 per cent in large cities, the impact has been much pronounced in smaller cities where the average price increase is much higher.

The average price of pulses has gone up by 6 per cent, 3.5 per cent for most edible oils, 15 per cent for potatoes and 28 per cent for tomatoes in large cities. In smaller cities, the price hikes have impacted retail food prices, which have gone up as high as 20 per cent.

The hikes have come after a period of steady decline in the prices of essentials. The supply disruptions due to the lockdown have now reversed the trend.

The findings are based on a quick study done for 28 days of the COVID-19 lockdown, comparing with prices during the month preceding the lockdown. The retail prices of 22 commodities from 114 centres were studied by economists — Sudha Narayanan and Shree Saha — from Mumbai-based Indira Gandhi Institute of Development Research.

Related News: Grape growers grapple with losses as lockdown shuts door on profit

The authors surveyed 50 food retailers in 14 cities and found that they were facing serious operational challenges in sourcing supplies, transporting them and overcoming police harassment. They say the increased prices are now showing no signs of reverting to the pre-lockdown levels.

Although in principle, the lockdown allowed free movement of “essential” commodities and was supposed to allow food markets to function without impediments, in reality, those involved in food supply faced insurmountable challenges, including intermittent closure of wholesale markets for agricultural produce.

It has been estimated that more than a hundred thousand trucks were stuck on highways. Fishermen who had ventured into the sea on the night of the announcement returned the next morning with their catch, unaware of the lockdown announcement, to find no buyers.

The police appeared to enforce the lockdown with an iron hand, forcing many street vendors of fresh produce to suspend their business and others to restrict hours of operation. e-Commerce and micro-delivery operations of food and groceries ground to a halt. Reports of harassment of delivery agents by the police surfaced in many places. Transporters were reluctant to risk plying their vehicles with the fear of being stopped.

Related News: Moody’s cuts India’s 2020 GDP forecast to 0.2% from 2.5% in March

In cities, many of these food retailing activities depended on migrant workers, who had left for their hometowns post-lockdown, compounding the operational challenges for many in the food retail sector. Several workers and traders chose to stay home fearing exposure to the disease. Wet markets for fish and meats as well as weekly farmers’ markets ceased to operate in many cities across the country.

The authors point out that apart from supply-side disruptions, the demand too collapsed. With thousands of eateries and restaurants and institutions shut and an exodus of migrant workers, demand for many commodities such as milk plummeted. Many milk cooperatives took drastic measures and stopped procuring milk from their members to cope with reduced demand.

The authors also noticed a marked increase in the gap between retail and wholesale prices, consistent with the increased transactions costs of retail traders operating during the lockdown. Due to transport restrictions, the prices rose steeply across locations. The findings do not portend well for the food security of the urban poor, especially in the face of massive unemployment and a steep drop in earnings, the study says.

The survey says supply disruptions were caused by non-availability of commodities and due to transportation bottlenecks. Pushcart owners and sweet vendor who retail fresh produce were especially constrained.

Related News: Amazon, Railways boost partnership for faster deliveries amid lockdown

In big cities like Bangalore, Delhi and Mumbai, vendors told the surveyors that before the lockdown, they had sourced their supplies of fresh produce from a single wholesale market. But now they were forced to go to different locations to source different items, sometimes make multiple trips (3-4) each day to do this.

The timings of the wholesale market were also unpredictable. Vendors in both Mumbai and Delhi reported having to procure produce at 2 am, rather than early morning as was practice. Another vendor said that often the supplies were thin and they were often unavailable by the time they could get to the wholesale market.

In Mumbai, retailers of fresh produce said that there was considerable uncertainty as to which wholesale market in the city would work each day — so that produce would arrive in one area of the city on one day and another one 20 km away the next day.

Initially, the poultry meat faced a huge slump because many consumers associated it with the spread of COVID-19. Soon after, in some cities, it had become impossible to procure mutton and chicken. Some vendors reported that chicken prices, after a collapse, had more than doubled, had gone up from ₹100/kg to ₹220/kg within two weeks in smaller towns, as had mutton prices where they continue to be traded.

Related News: COVID-19: Banks get 30 more days to file regulatory returns

A few kirana store owners indicated that due to supply constraints, wholesalers had raised prices of most commodities. Some retailers also mentioned that they were now stocking fewer items. In the early days of the lockdown, people had hoarded rice, wheat flour and oils and they felt that there was no demand any longer and had, therefore, stopped stocking them.

In general, most felt that demand was lower after the initial days. Close to a third felt overall demand had gone down relative to business as usual. While some said they were passing on the higher costs they faced on to consumers, others said they were absorbing the losses and not charging consumers a higher price.

Street vendors facing harassment from the police had done some innovations to survive. In many cities, many migrant workers or those were doing other business switched to selling fruits and vegetables, given the low entry barriers to informal retail vending.

A garage mechanic in Goa, forced to shut his shop, had switched to selling fresh produce. Many who had stalls have now either begun to use pushcarts or set up temporary stalls in residential complexes, since consumers could not venture out to shop as much.

Though not strictly within the purview of the study, the authors did point out shocking instances of social discrimination in many cities, where pushcart retailers of fresh produce who are from minority religion were denied access to neighbourhoods where they typically sold produce. There were instances where supermarket retailers refused entry to customers from specific ethnic backgrounds.

The curious case of Chennai

Geeta N, a resident of T Nagar was shocked on April 27 when a push-cart vegetable vendor sold 2 kg of onions for ₹200. The next day, she had to buy a kilo of tomatoes for ₹70 from another vendor. As most shops were closed due to the complete lockdown in the city from April 26 to 29, push-cart vendors in Chennai had had a field day.

“When I asked him the reason for the undue price rise, he told me I had a choice to not buy it. The vendor said he had many customers for this price in the same street,” says Geeta. Just a day before the complete lockdown began, she had bought onions for ₹30 a kg and tomatoes at ₹40.

Other vegetables like ladies finger and brinjal were sold at a nominal price at ₹30-40 a kg at standalone shops and supermarkets. However, push-cart vendors had sold these vegetables too at a much higher price. “A vendor charged me ₹120 for a kilo of beans. I had no other choice, but to buy it,” says Shanta of Adyar.

Some residents have even gone to the extent of lodging complaints with the Greater Chennai Corporation. “They make a margin of ₹40-50 for essential vegetables like onions, tomatoes and potatoes. When I confronted a vendor and told him I had lodged a complaint with the Corporation, he quickly backed down and said I could fix the price myself,” says Raghukumar Choodamani from Perambur.

Related News: When people rush in to get food in TN, paddy sacks get drenched in rain

However, the supply chain of the vegetables have not been disrupted, pointed out VR Soundararajan, advisor to the Koyambedu Market Wholesalers’ Association. “We have been getting our stock from Bengaluru, Chittoor and from different places in Maharashtra and Uttar Pradesh.”

He explained that onions were being sourced from Raichur and Manthralayam in Karnataka, besides Anantapur, Cuddapah and Kurnool in Andhra Pradesh. “We also receive onion supplies from Maharashtra’s Solapur, Sangli and Ahmednagar,” he said.

While the invariable price rise seems like a ploy used by vendors to milk the situation of sole dependence on them by residents, the Greater Chennai Corporation has largely been unable to rein in on them. A source from the Corporation said, “We only issue licenses to the vendors and are unable to send squads to check the prices like we usually do.”

(With inputs from Janani Sampath)