Friday, February 8, 2013

Why are authorities blind to this cruel reality?

Here is an interesting photo-verse by my wife on the price of vegetables in our city; mercilessly hiked by middlemen. Middlemen bargain and procure vegetables from farmers at extremely low price; move them by a short distance and sell them to us at abnormally high price.
As an example, she illustrated the price of a Pumpkin we bought for Rs. 15, 25 Kms. away from our house at a village shandy. And this Pumpkin would have cost us Rs. 72/- in the city! An unbelievable 480 percent increase. Same is the case with all other vegetables grown in neighboring villages.
Truly middlemen are called parasites. Unchecked and ungoverned their misdeeds and greed is harming the farmers and us.
The cost of this Pumpkin,
Is just Rupees fifteen!
At a village Shandy,
Outside Secunderabad City.
And in Secunderabad City,
It is Rupees forty a Kg.
That is Rupees seventy-two!
A price escalation by 480%!
This is how middlemen loot us!
There is no end to their greediness.
Middlemen also pinch money from farmers,
And the authorities are clueless to end this mess.
- Mrs. N. Lalitha Raghu.

1 comment:

  1. Dear Mr.Raghu,

    Interesting take on the role of middlemen in the vegetable market. What caught my eye was the word 'misdeeds', which seemed to project the role of the middleman through a moral lens.

    In a macro-economic context, the vegetable market does not behave any differently from the overall retail industry. In fact, whether it is vegetables or air conditioners, a value chain exists, each link in the chain having its own function and value. The producer does not have the capabilities to distribute. The distributor does not have the capability to produce or retail. Even if you eliminate the middleman in this context, the farmer still gets only his $15. The retailer has to sell for a much higher price because part of the vegetables that the retailer purchases from the wholesaler will perish, and this has to be accounted for. The wholesaler sells to the retailer for a premium since he is taking all the risk when he buys the entire crop from the producer(farmer).

    Viewed from the angle of the overall economy, when each link in the value chain makes a profit, that profit is income for people at that level. That profit is what helps the middlemen survive and feed their families. They purchase other goods and services from other businesses, which in turn make a profit. And the cycle is thus propagated. In this example, the producer-farmer is fully aware that his pumpkin is being sold at $72. So he can, in theory, sell it at $50 (less than the retail price) in the city and avoid the middleman. But he does not. Why? I think because his entire crop is being purchased by the middleman, the farmer takes no risk. If the farmer were to try to sell everything by himself, he would be left with a good amount of unsold inventory, and would potentially make even less money than if he dealt with the middleman. When he sells to the middleman, the risk now belongs to the middleman. If the retail outlets (like Reliance Fresh) do not buy from the middleman, he will be stuck with an inventory he cannot get rid of.

    The moral stance made me curious, and so I thought I would write. Morality would apply only if the middleman is forcibly preventing the farmer from bypassing him and selling his produce directly to the retailer or final customer. When everything is being done voluntarily and with full knowledge (I may be naïve in assuming that it is), I don't believe there is anything unethical or immoral about the practice.

    My two cents/paise worth.

    Cleveland, Ohio


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