Price volatility keeps potato farmers on tenterhooks

Sher Singh Sangwan

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POTATO is regarded as a ‘food security crop’ in many countries around the world, including India. It is consumed both as a vegetable and also in a processed form as chips, fries, patties, etc.

The Indian Council of Agricultural Research (ICAR)-Central Potato Research Institute, Shimla, carries out research, education and extension activities in collaboration with national and international partners for enhancing potato productivity and profitability, achieving sustainable food and nutritional security and alleviating rural poverty. The Food Processing Industries Ministry has been implementing Operation Greens since November 2018 for integrated value chain development of tomato, onion and potato (TOP) crops in selected clusters. The scheme has two components — a long-term strategy (value chain development projects) and a short-term one (price stabilisation measures through grant of transportation/storage subsidy).

Potato farming is often part of a crop rotation system that can improve soil health. Its cultivation reduces soil erosion and nutrient depletion, leading to healthier and more productive farmlands. Thus, potato production and its prices affect consumers as well as producers; the latter are in the news almost every other year due to a crash in crop prices. In November last year, potato prices in West Bengal had gone down by around 30 per cent compared to the year-ago rate due to lack of export avenues and early arrival of fresh produce from Jharkhand. In view of a supply glut and lower prices in markets, potato growers from the state had been exporting the crop to Bangladesh. However, they suffered a setback due to lack of demand for potato imports in the neighbouring country. In February 2023, farmers of Punjab had suffered. The price of table varieties of potato, which were selling for Rs 1,400-1,500 per quintal in the 2022 season, had crashed to as low as Rs 350; the price of premium varieties, which had fetched Rs 1,800 a quintal, had dropped to only about Rs 550.

Potato farming contributed to India’s gross domestic product (GDP) by about Rs 82,260 crore in the 2020-21 financial year. The crop is known for wide annual price variations. Hence, it is said: “Aalu ka nuksan aalu se hi poora hota hai”. The crop is mainly cultivated under irrigated conditions and hence, its yield risk is much less than the price risk. India is the second largest potato producer in the world with an output of 55 million metric tonnes (MT), behind China with 94.3 million MT. Ukraine and the US are third and fourth in potato production with 22 million MT and 19 million MT, respectively, in 2020-21.

In India, potato is cultivated in over 20 states and 90 per cent of it is grown as a rabi crop from October to March and the rest as a summer/kharif crop in the hills of Karnataka, Bihar, Maharashtra, West Bengal and the Himalayas. The trends in potato’s area and production over the past decade or so need to be examined to understand price volatility.

In terms of area, Uttar Pradesh (28 per cent) makes the maximum contribution, followed by West Bengal (21 per cent), Bihar (14 per cent) and Madhya Pradesh (7 per cent). Gujarat, Punjab and Assam account for about 5 per cent each. Eight states contribute 87 per cent to the all-India area under potato. In terms of production, these eight states account for about 90 per cent of the national output due to a higher yield, especially in West Bengal, Bihar and Punjab, where the production share is more than that of the acreage. It is to be noted that potato meant for prompt consumption is harvested from December onwards, whereas the ‘storage potato’ is harvested in February-March.

Three-year cycle

The crop generally follows a three-year cycle. In the first year, the prices may be very high; hence, the farmers tend to increase the area under cultivation in the following year, resulting in excess/glut in production and a crash in prices. The crash may then induce farmers to decrease the area. Thus, things are back to square one. The cycle would keep getting repeated unless timely interventions are made by the Central and state governments. Earlier, sugarcane also followed a similar cyclical trend, but after a continuous increase in the State-Advised Price (SAP) at which sugar mills purchase the crop, the cycle has been broken. Similar steps can be taken in the case of potato to reduce price variations that hurt farmers. In this regard, the UK has fixed a quota of the area under potato per farmer to control production and provide guaranteed prices to growers for the long term. According to a recent report, the British potato crop was expected to hit its lowest-ever level at 4.1 million MT due to heavy rain and flooding.

In states such as Haryana and MP, the Bhavantar Bharpai Yojana is being implemented to compensate farmers if the crop price drops below a predetermined figure. For instance, this year, if farmers in Haryana get a price below Rs 600 per quintal, the difference will be paid by the government to those who have applied for compensation. The UK’s approach is to prevent the fire, while some Indian states are trying to douse it after it has spread. An area planning approach may be a sustainable solution by using the minimum guaranteed (support) price as an instrumental variable.

The author is former General Manager, NABARD, and former Professor, SBI Chair, CRRID, Chandigarh

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