JAIPURIA INSTITUTE OF MANAGEMENT

LUCKNOW

ECONOMICS OF BUSINESS ASSIGNMENT

ESCLATION OF FOOD PRICES

SUBMITTED BY: SUBMITTED TO

Shayan Faheem (JIML-10-130) Prof. Mahima Sharma

Shivangi (JIML-10-134)
Shobhit Agarwal(JIML-10-137)
Suhaib Parvez (JIML-10-146)
Sukriti Gupta (JIML-10-148)

Sec-C
 INTRODUCTION

As we were given the topic “Inefficiencies in the supply chain leading to the
escalation in food prices”, we have to select a food iten and then we have to
make a study by visiting a farm so as to know what are the factors which
lead to such increase in the prices.

So, we chose mango and selected ‘malihabad’ district lucknow as the place
for our study. Malihabad is a town and a nagar panchayat in Lucknow
district in the Indian state of Uttar Pradesh. It is the mango belt of North
India and is internationally acclaimed for its mangoes. Among different
varieties of mangoes grown here, Dussheri is the most popular variety.
Besides Dussehri, other varieties of mangoes such as Chausa, Fazli,
Lucknowa, Jauhari, Safeda, etc. are also grown here.

Coming on to the food we chosen, which is mango, it is a fruit which is

indigenous to the Indian subcontinent, belonging to the genus Mangifera,
consisting of numerous species of tropical fruiting treesin the flowering
plant family Anacardiaceae. While other Mangifera species (e.g. horse
mango, M. foetida) are also grown on a more localized basis,Mangifera
indica – the common mango or Indian mango – is the only mango tree
commonly cultivated in many tropical and subtropical regions, and its fruit
is distributed essentially world-wide.

During our project we went to malihabad and talked to various farmers and
vendors and got to know about the supply chain of mangoes.
REASONS FOR ESCLATION IN THE PRICES OF FOOD IN INDIA

Food Prices have become one of the most important topics in India over the last 2 years.
A Deficient Monsoon season in 2009 was the primary cause of a sharp rise in Food Prices
leading to Food Insecurity for a majority of the India. A recent study found that more
than half of the Indians still live in poverty making Food Prices perhaps the most
important issue for them. With a vast majority of Indians living on wages below
$2/day,increasing food prices can mean hungry stomachs to even sometime starvation
.Not that starvation is new to the Indian state with parts of Eastern India particularly
Orissa infamous for starvation deaths. Food inflation in India has continued to rage even
in 2010 with prices increasing by a whopping 17-18%.What has led to this sharp rise in
food prices which has made the lives of poor Indians even more miserable. The causes
are both local and external and have been listed down

• Higher Food Prices worldwide as Food Futures are treated as an Asset

Class by Investment Banks and their Clients
• MNREGA scheme which has led to labor shortages amongst rural
workers and higher wages
• Lower agricultural growth in India compared to the much faster GDP
growth
• Rising percentage of Middle Class in India which is demanding
increasing quantities of better quality food products. With increasing incomes,
people prefer to eat more meat which is more food grain intensive than a vegetarian
diet
• High general Inflation is also a contributor to higher Food Prices
• Inefficiency in the Food Supply Chain. India wastes a huge amount
of Food due to an antiquated supply structure which involves middlemen and
mandis. These middlemen add no value and lead to higher retail prices for
food besides indulging in hoarding practices. Foreign investment in the Retail
area has been prevented by these vested interests.
• Dependence of Indian Agriculture on Monsoon Rains. India’s low
investment in Irrigation has implied that a majority of the crop growing areas are
dependent on seasonal rains. This was brought out starkly when Monsoon Rains
failed in 2010
 INEFFICIENCY IN SUPPLY CHAIN AND ESCLATION IN FOOD
PRICES FROM FARM TO THE CONSUMER

“MANGO”

Mangoes are usually grown in ‘Malihabad’ district lucknow of Inidia. Mango is a

seasonal fruit which is available during the summer season which is may-june.
Farming of mangoes is lengthy process which involves hard work from a farmer.

FROM FARM TO PRELIMENARY MARKET:

While interviewing a farmer of malihabad we got to know that they usually sell mangoes
in a market of ‘dubagga’(a village between lucknow and malihabad) for Rs. 100 per box.
1 box contains 10 Kgs of mangoes. In this Rs. 100 following expenses of farmer is
included:

• Care & Maintainance

• Irrigation
• Cost of plucking(if done by laborers)
• Cost of box, which is approximately Rs. 15
• Packing and Miscellaneous expenses
• Transportation cost( from farm to ‘dubagga’ market)

After paying the above mentioned expenses, the left over profit is of the farmer.

FROM PRELIMENAY MARKET TO MAIN MARKET:

After mangoes reached to the ‘dubagga’ market then from there it will be sold to the
street vendors of mango at wholesale price. Usually these are sell through agents which
are called arhatiyas. They charge a commission for making a deal between seller and the
street vendors. These agents charge commission from both the purchaser as well as the
seller, these commission are varies from 2-3%. After the deal has been finalized, street
vendors take his stock and reached the main market. The various cost of vendor is as
follows:

• Transportation cost from main market to preliminary market

• Commission of agent
• Price if purchased stock
• Transportation cost from preliminary market to the main market
• Cost and time involved in grading( segregating mangoes on the basis of their
quality i.e. size, shape, good shape, etc.)
FROM VENDORS TO THE FINAL CONSUMER

The main market of mangoes in lucknow is near residency, where these vendors sell their
product to the final consumer. Though the price of mangoes depend upon its supply,
which varies frequently, but the basic price that vendors charge to customers is Rs. 200
for a box.

Therefore the mango which is produce at Rs. 7-8 per Kg is sold to the final consumer at
Rs. 20 per Kg. The main inefficiency in the supply chain is that there is no direct contact
between the producer and the final consumer. The intermediaries in between specially the
agent increases the prices from Rs. 8 per Kg to Rs. 20 per Kg. It is due to these
intermediaries that there is so much escalation in the prices of mangoes. Along with this
the farmers are not educated enough and could not find enough means to go and sell their
product directly into the main market.

Conclusion

The project taught us a lot regarding the price structure of the industry. While surveying
the malihabad farm we came to know about the supply of mangoes from different
suppliers to direct consumers. Since the mangoes goes through various intermediaries all
the people concerned make their profit by selling it at a higher price. As a result of which
the consumers have to pay more. Not only this, there are other factors that influence the
increase in price like transportation cost, commission of agents etc. Therefore it can be
concluded that there is an increase in price of the commodity since there are many factors
which influence the original price.