DESPITE its best efforts, the government has failed to break the three-month old resistance of traders and hoarders to get the price of potato to its normal level. In fact, they have been tenacious enough to further raise the prices during the month of Ramazan.

The Economic Coordination Committee of the Cabinet (ECC), in its meeting on April 25, had allowed duty-free import of 200,000 tonnes of potatoes from India from May 5 till July 31 under the belief that the entry of cheaper Indian potatoes will compel the hoarders to bring their stored commodity into the open market and sell it at Rs30 per kg. But the measure has failed to produce the desired effect. Driven by the same illusion, the ECC, in a meeting on July 17, conceded duty-free import of another 100,000 tonnes of potatoes till November 15 when the new crop is expected.

The government hopes that its new measure will restore sanity in the potato business. The potato prices averaged around Rs60-70 per kg in most of the bachat bazaars specially set up in many cities for providing relief to the consumers in the holy month. The frequent warnings by the finance minister to take punitive action against the hoarders if they persisted in charging high prices was not heeded. The ministry never took any action against any trader. It is sold at Rs80 per kg, particularly in posh urban areas.

According to Indian media, so far the potato exporters from the state of Punjab were selling their produce to Pakistani importers at Rs21 to 22.50 per kg. But it will be available at higher prices as the Indian government has fixed the minimum export price at $450 a tonne or Rs 27 per kg

Another measure the government undertook to ease the potato prices but failed on this count as well has been the imposition of regulatory duty on export of potatoes. The ECC on the recommendation of the minister for national food security and research decided to impose 25pc regulatory duty on the export of potato from May 5 to July 31. The Federal Board of Revenue (FBR) is now gathering data about regulatory duty collected on the export of potatoes during that period. In this regard, the FBR has asked all Model Customs Collectorates to provide information about quantity, export value and the amount of duty collected.

According to Indian media, so far the potato exporters from the state of Punjab were selling their produce to Pakistani importers at Rs 21 to 22.50 per kg. But it will be available at higher prices as the union government has fixed the minimum export price (MEP) at $450 a tonnes or Rs27 per kg. An Amritsar exporter thinks he could sell his potato even at a higher price than the MEP for the local price in Pakistan is still much higher.

Incidentally, prices of potatoes in India are also on the rise because of two reasons, according to daily Business Standard. One reason is the lower production of the commodity. There have been rains in major producing areas like Uttar Pradesh, Punjab, Haryana and Bihar in recent months which has affected the crop and the expected production loss may touch 25-30pc.

Second reason is the significant demand from other countries. “Pakistan, for instance, has removed the duty on potato to be imported and is seeking 200,000 tonnes.” Another country is Bangladesh. Both countries, also exporters of potato and India’s competitor, had a poor crop in the last Rabi season due to adverse weather conditions and crop disease. As the demand has picked up, so has the price. In the past two months, prices have risen by 20-25pc in the international market, making exports viable.

Pakistani officials tend to blame traders, profiteers and hoarders for creating the artificial potato crisis while Indians attribute the higher prices to shortage and the need for imports by Pakistan to poor crop, production losses due to bad weather and crop disease. The prevailing Pakistani viewpoint is that there is no shortage of potato as such although frost had destroyed considerable quantities. But after taking into account the frost losses, there does exist sufficient quantity of the commodity to meet the population’s needs.

Farmers Associates Pakistan, a leading NGO of rich farmers, has a different point of view. It says this year the yield of potatoes was less than normal because of adverse weather and extension in winter season. Then due to losses caused by frost, there was re-sowing of the crop which ultimately increased the input costs and, hence, the higher price. Besides, there has been a reduction in areas under cultivation of potato as many farmers, not getting proper wages or return, have switched over to other crops.

According to official figures, the total production of potatoes had decreased to 2.895m tonnes in 2013-14 from 3.785m tonnes in 2012-13 due to the decline in area under cultivation by 10.71pc. Then, there was shortage of sufficient potato seed at the time of sowing which caused decrease in cultivation area and hence in production. The total annual domestic requirement of potatoes is 2.662m tonnes while about 80,207 tonnes of potatoes were exported during January- March period this year.

Published in Dawn, Economic & Business, July 28th, 2014