Editorial 1: Why are tomato prices still high?
Context
- As prices of tomatoes hover between ₹100 and ₹200 in various parts of the country, the Reserve Bank of India’s latest monthly bulletin has highlighted that the volatility of tomato prices has historically contributed to overall inflation levels in the country.
Tomato production in India
- Tomato production in the country is concentrated regionally in the States of Andhra Pradesh, Madhya Pradesh, Karnataka, Odisha, and Gujarat, which account for close to 50% of total production, according to Ministry of Agriculture and Farmers Welfare figures.
- There are two major crops of tomato annually — kharif and rabi.
- The rabi crop hits the market between March and August annually while the kharif crop comes to markets from September.
- Some regions in Maharashtra and Himachal Pradesh’s Solan are able to grow tomatoes during the monsoon months, while in the summer, Andhra Pradesh’s Madanapalle region alone accounts for tomato cultivation in the entire country.
- As for tomato production, it peaked in 2019-20 and has been declining since.
Reasons for price hike
- There are multiple factors for the dip in overall tomato production this year, with the two key reasons being extreme weather conditions and low commercial realisation of the crop for farmers in the months before June as well as last year.
- The heatwaves and high temperatures in April and May along with delayed monsoon showers in southern India and Maharashtra led to pest attacks in tomato crops.
- A lot of farmers resorted to selling whatever crop they had at these prices while some abandoned their crops.
- This led to a crunch in supply. Later, incessant rains in tomato-growing regions further affected the new crop.
- The fact that July-August is a lean production period for tomato, as it falls between yields, compounded the problem.
- Reports show that many farmers in the Kolar district of Karnataka, which is usually responsible for sizeable tomato supplies, shifted to beans owing to the higher prices it fetched last year.
Whether a seasonal issue or temporary
- The Centre has called this sudden and sharp price rise in tomatoes a “seasonal” and temporary issue.
- Consumer Affairs Ministry Secretary Rohit Kumar Singh stated that there is a seasonality to tomatoes.
- However, policy experts over the years, and now the RBI and the National Bank for Agriculture and Rural Development (NABARD), have expressed concerns over this high seasonal price volatility of tomatoes and its impact on the overall Consumer Price Index (CPI).
- A NABARD study from last month notes that tomato is the most volatile out of all the three TOP (tomato, onion, potato) agri-commodities.
- While the weightage of the food and beverages component in the combined CPI is 45.86, vegetables account for a relatively small part of this at 6.04, and the TOP commodities are even lesser at 2.20.
- Even with such a low weightage, the contribution of TOP to the overall CPI has been quite volatile.
- There are multiple reasons behind this starting with how it is more perishable than onion and potato.
- Supply chain issues in transporting the vegetable from areas where it is grown to regions where it is not compound the problem.
Controlling volatility
- Policy experts say high volatility can be tamed by making some improvements.
- First, since tomato is highly perishable, improved value and supply chains can help with the problem.
- An organised value chain involves a market-focussed collaboration of a set of entities working in tandem to produce, process and market products and services in an effective and efficient manner.
- An ICRIER study suggests increasing the processing capacity for tomatoes. Building more processing units and linking tomato value chains to processing of at least 10% of tomato production into tomato paste and puree during peak seasons, and using them in the lean season when fresh tomato prices spike can be a solution.
- The development of integrated cold chains has also been suggested.
Way forward
- A 2022 study estimated that farmers’ share of what consumers pay for tomatoes is only 32%. Eliminating middlemen and encouraging Farmer Producers Organisations to sell produce directly, as well as amending rules of Agricultural Produce Market Committees to reduce commission and other fees has been suggested.
Editorial 2: More than court action, revisit the Indus Waters Treaty
Introduction
- The Indus Waters Treaty (1960), or IWT, that regulates the Indus water courses between the two riparian states of India and Pakistan, is cited by many as an example of cooperation between two unfriendly neighbours for many reasons. These include the IWT having survived several wars and phases of bitter relations, and its laying down of detailed procedures and criteria for dispute resolution.
Current status
- In the last decade, exercising judicial recourse to settle the competing claims and objections arising out of the construction and design elements of the run-of-river hydroelectric projects that India is permitted under the IWT to construct on the tributaries of the Indus, Jhelum and Chenab before these rivers flow into Pakistan, has increased.
- In January this year, Pakistan initiated arbitration at the Hague-based Permanent Court of Arbitration to address the interpretation and application of the IWT to certain design elements of two run-of-river hydroelectric projects — on the Kishanganga (a tributary of the Jhelum) and Ratle, a hydro-electric project on the Chenab.
- India raised objections as it views that the Court of Arbitration is not competent to consider the questions put to it by Pakistan and that such questions should instead be decided through the neutral expert process.
- On July 6, 2023, the court unanimously passed a decision (which is binding on both parties without appeal) rejecting each of India’s objections. The court determined that it is competent to consider and determine the disputes set forth in Pakistan’s request for arbitration.
Future supply of water
- In an atmosphere of a lack of trust, judicial recourse appears to be the only rational strategy by the IWT parties.
- But it is not likely to address the rapidly growing industrial needs of the two countries, apart from food and energy needs.
- The IWT provides only some element of predictability and certainty with regard to the future supplies of water to the riparian states, but it needs to incorporate mechanisms that allow flexibility to changes in the quantity of water available for allocation among the parties.
- Bilateral water agreements are vulnerable to climate change as most of them include fixed allocation of amounts of water use that are concluded under the assumption that future water availability will remain the same as today.
- Under the partitioning logic in the IWT, envisaging a vesting of proprietary rights does not take into account future water availability.
Principles of water course
- The partitioning of the rivers goes against the logic of treating the entire river basin as one unit which is needed to build its resource capacity.
- The thrust of the IWT is optimal use of the waters which India believes to be the object and purpose of the IWT as opposed to Pakistan’s understanding to be the uninterrupted flow of water to its side.
- Reconciling this divergent approach can be sought with the help of two cardinal principles of international water courses law accompanying binding obligations, i.e., equitable and reasonable utilisation (ERU) and the principle not to cause significant harm or no harm rule (NHR).
- Although there is no universal definition of what ERU amounts to, the states need to be guided by the factors mentioned in the Convention on the Law of the Non-navigational Uses of International Watercourses 1997, including climate change.
- The NHR is a due diligence obligation which requires a riparian state undertaking a project on a shared watercourse having potential transboundary effect to take all appropriate measures relating to the prevention of harm to another riparian state, including carrying out a transboundary environmental impact assessment.
- In order to ensure rapid development, the states prioritise the ERU over the NHR.
Way forward
- In an atmosphere of a lack of trust between the two neighbours, the World Bank, a party to the IWT, may use its forum to forge a transnational alliance of epistemic communities (who share a common interest and knowledge to the use of the Indus waters), to build convergent state policies, resulting in the ultimate inclusion of these two principles in the IWT. Thus, revisiting the IWT is a much needed step.
