Despite crash in prices, coconuts still costly for consumer in Karnataka

When this blog posted about urgent need to inform and communicate about agricultural sector, these are the kind of developments one was talking about.

Apparently, there has been a surge in cocnut supply in Karnataka leading to drop in prices at wholesale level. But you guessed it -Consumers continue to pay high prices:

Karnataka faces a coconut conundrum: The prices of coconut have crashed in the wholesale market but it continues to remain overpriced for consumers in the retail market.

With the government yet to wake up to the falling prices, coconut is all set to to make noise in the forthcoming legislature session as lakhs of growers in 27 taluks have been affected. Farmers who used to earn Rs 19,000-20,000 per 1,000 coconuts are now getting a mere Rs 6,000-7,000. In other words, a single coconut costing Rs 20-25 in the wholesale market is now being bought from farmers at Rs 6.

However, the crash hasn’t proved to be beneficial for the end consumer. The price continues to hover around Rs 20 in the retail market in Bengaluru. A medium-sized coconut costs around Rs 16 at a Hopcoms outlet. Ths situation is so bad that wholesalers have been stalling growers from bringing coconuts to the market. Horticulture department officials blame unscrupulous traders for the overpriced coconuts. They are optimistic that prices will plummet in the retail market soon.

 The crash in prices is attributed to the rise in coconut production in neighbouring Andhra Pradesh and Tamil Nadu and the increase in import of coconut oil from Malaysia and other southeast Asian countries.
This happens so often. However, if prices had risen in wholesale be assured that they would have jumped at consumer as well.  This is ofcourse as consumers we are all too dispersed to demand lower prices. The retailers do not suffer from this and can decide easily whether to or not to pass prices.
What would be the solution to protect suppliers? MSP of course:
Arsikere MLA K M Shivalinge Gowda, who is from the coconut-growing belt, blamed the government for not showing interest in extending minimum support price (MSP) to the distressed farmers. “Coconut growers faced a similar situation a few years ago and the Centre had announced a minimum support price of Rs 6,500 per 1,000 coconuts (the Centre’s contribution was Rs 5,500 and the state’s Rs 1,000). But the situation is worse this time and the state is yet to alert the Centre. We will intensify our demand for MSP in the legislature session,” he said

Arsikere, Tiptur, Channarayapatna, K R Pet, Kunigal, Turuvekere, Chikkanayakanahalli, Gubbi, Kadur and Tarikere are among the major coconut-growing areas in the state. Plantations are also found in the Malnad and Mysuru regions.

There you go. No such thing for consumers as it interferes with market forces.
Indian agriculture is so full of distortions and erratic policy.

One Response to “Despite crash in prices, coconuts still costly for consumer in Karnataka”

  1. Linkfest - Kairos Capital Says:

    […] Distortion in agricultural markets (Mostly Economics) […]

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