Middlemen make it while farmers and consumers suffer

Vegetable farmer Jhilke Khadka from Dhunibesi Township, Dhading grows tomatoes, cauliflower and green onions which are sold at Kalimati, the largest farmers’ market in Nepal.

Dhading district adjoins Kathmandu in the west, just over the edge of the valley; but Khadka has never seen the market in Kalimati where he has been shipping his vegetables for the last 16 years.

“Traders come to my farm,” he told the Post by phone.

When the weather is favorable, this 50-year-old farmer harvests 3 to 4 tons of green onions and cauliflower per season. He also produces more than a ton of tomatoes, the most sought after vegetable.

Narayan Luitel, who is also from Dhunibesi, has been a vegetable trader for seven years. He collects vegetables from farmers and sends them to the market in Kalimati.

“I make a profit of Rs 10 per kg from the sale of green onions. That’s a huge profit margin,” Khadka said. “But the situation is not always in my favor. Sometimes we face losses.”

In the agricultural business, the profit margin fluctuates like the weather. Drought, disaster, strike, shortage and roadblock mean a bonanza for vegetable traders. So it’s a vendor’s market, and they can name the price, the vegetable merchants say.

Today, transportation and labor costs are high, according to Luitel. “Usually I make a profit of no more than Rs5 per kg. But I pay farmers regularly even if I suffer a loss,” Luitel told the Post at the Kalimati market.

Green onions are sold at Rs 20 per kg in Kalimati. The same vegetable is retailed in Aloknagar, Baneshwar for Rs 100 per kg.

Last week, Gita Rupakheti, who had brought cauliflowers from Khanikhola, Dhading, sold them at Rs 20/kg in Kalimati. “Earlier in the day, I was charging Rs25 to Rs30 per kg,” said Rupakheti, who has been in the business for a decade and a half.

“Obviously, prices vary. When we buy from farmers, we can get vegetables at a lower price. They cost more when we buy from intermediaries.” Rupakheti says that he pays between 16 and 17 rupees per kg when he buys directly from the growers. “Farmers pay a transportation charge of around Rs 2.5 per kg.”

On the same day, other traders in Kalimati were selling cauliflower for Rs 30-40 per kg at retail.

Rajkumar Khadka, 22, runs a wholesale stall at Shantinagar Tarkari Bazaar, a vegetable wholesale and retail market in Baneshwar, where he sells potatoes, onions and garlic.

“These days, it costs me 20 rupees per kilo to bring potatoes from Sarlahi to Kathmandu,” Khadka told the Post on Thursday night. “I paid Rs14 for the potatoes, Rs5 for the transport and Re1 for the porterage.”

Nirmala Devi Panta, 54, runs a vegetable stall in Shantinagar. She was selling cauliflower from Kavre at 30 rupees a kilo.

A 15-minute walk from Shantinagar in Sahayoginagar, Koteshwar, retailers charged Rs 50 per kilo for the same cauliflower. Retailers here source their inventory from the wholesale markets in Shantinagar and Kalimati.

According to the official Web site According to the Kalimati Fruit and Vegetable Market Development Board, which monitors vegetable prices daily, cauliflower prices fell in the last week of March before rising again in April.

From March 25 to 29, the average price of local cauliflower was Rs 11.50 to Rs 25 per kg. On March 30, the average price rose to Rs35.

While Khadka says he usually earns 10 rupees per kg, the price doubles when the vegetable reaches wholesalers in the Kalimati market and triples when it reaches retailers in different parts of the valley.

Goods and services sold in Nepal typically pass through up to seven levels of intermediaries, each adding a high markup, forcing consumers to pay unfairly high prices, according to the Commerce Department report, Supply and Consumer Protection.

Multi-layered supply chains are mainly seen in the trade of agricultural products. A product priced at the farm gate of Rs 10 ends up priced at Rs 70 when it reaches the customer, according to the report.

In most companies, a product moves from manufacturer to distributor, major distributor, national distributor, local distributor, wholesaler, and retailer before reaching the end user.

As there are no regulations to control unnecessary layers of intermediaries, the department said it had prepared a preliminary draft to legally determine the layers of intermediaries in the distribution of essential goods under the Consumer Protection Act of 2018. But it was never implemented.

Inconsistency in vegetable prices is a serious problem, consumers say.

“There is a monopoly in the vegetable market due to serious monitoring failures,” said Yam Bahadur Karmacharya, an 82-year-old buyer the Post met in Kalimati.

Karmacharya said that he only trusted a few merchants whom he had known for years and bought his vegetables from them. “The authorities involved should keep an eye on prices. They should conduct market inspections regularly,” Karmacharya said.

“It looks like the market management committee is just busy collecting fees and taxes. It does not consider how it imposes a burden on consumers suffering from high inflation.”

According to the Nepal Rastra BankYoY consumer price inflation stood at 5.97% in the first seven months of fiscal 2021-22 compared to 2.70% a year earlier.

The prices of ghee and oil, vegetables and legumes and legumes increased by 20.68 percent, 14.07 percent and 9.36 percent, respectively, year on year.

Experts are concerned that high inflation could cause Nepalese consumers to cut back on spending, which would be disastrous for the recovery of the economy hit by the Covid-19 pandemic and then the Russo-Ukrainian War that disrupted supply chains and fuel prices hit record highs in global and domestic markets.

Consumer spending is the main driver of the Nepalese economy. The Central Bureau of Statistics revealed that in the latest fiscal year 2020-21 ending in mid-July, Nepal’s final consumption expenditure at current prices amounted to Rs 3.98 trillion, accounting for 93.38 per percent of gross domestic product.

Some consumers say there are wide variations in vegetable prices by location, but not everyone has time to visit wholesale markets to buy vegetables.

Khadka said traders get better prices when there is a shortage in the market. “But traders also face losses. Once, cauliflower prices dropped to Rs 7/kg when we had bought them at Rs 15/kg.”

In the Kathmandu valley, vegetable prices fluctuate widely due to multiple layers of middlemen, especially between wholesalers and consumers, Khadka said.

Madhav Timalsina, president of the Consumer Rights Research Forum, says there are many layers of intermediaries between farmers and customers, resulting in farmers getting less value for their produce. In the long term, this discourages farmers from continuing to farm.

In August 2018, the government formed a committee after seasonal vegetable prices skyrocketed 30% for a month, while out-of-season vegetables became up to 50% more expensive due to the involvement of middlemen.

The committee’s report recommended making a purchase bill mandatory to ensure transparency in the purchase rate (the price paid to farmers) and reduce the involvement of middlemen in the supply chain.

“The government did not implement the recommendations, giving intermediaries more freedom to raise prices,” Timalsina said. “The Consumer Protection Act of 2018 has provisions to determine the level of market prices. But nothing has been done so far.”

The middlemen take home a large sum of money, in some cases more than the farmers’ profits, traders say.

(Krishana Prasain contributed to this report.)

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