Tomato Prices Crash in Major Indian Markets Due to Oversupply

Tomato prices have crashed in major Indian markets due to oversupply, going from nearly ₹8000 a quintal to ₹200-300 a quintal in some markets in a matter of weeks. This is a familiar pattern of price volatility of key groceries that pinches both consumers and growers every alternate season.

The problem highlights the lack of price information for farmers, low levels of food processing and what economists call the ‘cobweb phenomenon’. In July, average retail tomato prices tripled from around ₹30 per kg in June to ₹109 per kg. This led to a 7.44% increase in consumer inflation, a 15-month high. Retail inflation in August slowed to 6.83% on the back of easing prices of vegetables.

Farmers are dumping their produce in some markets because the rates are unviable. Some are selling tomato as cattle feed. Price volatility of perishables is a key political risk in India. The government, which has little control over prices of perishables, has swung into action by buying tomatoes at high prices and distributing them in major cities at a huge discount.

The real solution is a big scaling up of food processing. Also, farmers shouldn’t overreact to high prices by switching to a commodity that has seen an abnormal price rise. The problem lies in the “very nature of this crop’s high perishability, short-duration crop and inability to store the crop for long (due to high perishability) and production concentration in few states,” a paper by the National Bank of Agriculture and Rural Development stated last month.