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Niche green

Organic food costs 30 to 40 per cent more than regular produce— but the farmer does not benefit. Mini Pant Zachariah reports.
Hindustan Times | By Mini Pant Zachariah
UPDATED ON MAR 16, 2008 02:58 AM IST

At a specialty food store in south Mumbai, Devi Parthasarthi, mother of two, debates the pros and cons of buying a pack of organic brown rice that retails at Rs 65 a kilogram.

The information on the packet lauds the virtues of organic food. But the rice is twice as costly as conventionally grown rice. It is an all-too common dilemma for health- and environment-conscious buyers in India.

Given that the average dry grocery bill for an urban middle-class family in India is around Rs 4,000, a 50 per cent mark up thanks to organic products would skew the family budget. Hence, organic foods have become the preserve of the rich.

Because organic food is a niche product, there is no bulk demand for it. And that translates into fewer incentives for those who produce, market and sell such foods.

Also, consumers have to realise that organically grown food is not necessarily bigger or prettier, but more importantly, healthier and tastier.

Says Ishi Khosla, clinical nutritionist and director, Whole Foods in New Delhi, “After the cola-pesticide scare people became aware of pesticides in food and started taking to organic food in larger numbers. Though my clientele to begin with was very elitist, today I get people from small towns in UP and Haryana as well.”

Input costs
So why does organic food cost so much more? Girish Sohani, executive vice president of Bharatiya Agro Industries Foundation development and research centre, a Pune-based non-government organisation, explains that the cost of production is about 20 per cent higher mainly because of lower yields (since they don’t use chemical fertilisers) and higher labour costs.

For instance, he says, processed organic food like hand-pounded flattened rice (known as dagdi pohe), costs 50 to 70 per cent more than the conventional machine-pounded rice flakes. In the hand-pounding process, the carbohydrates convert slowly to sugar and give the pohe a distinct taste. Hence, he says, as with good wine, you pay more for organic food.

Rama Krishna Kompella, manager, marketing of 24-Letter Mantra, an organic and natural food store chain in Hyderabad, adds on some reasons. “Organic food costs more because the procurement price is 10 to 15 per cent higher and the logistics of transporting the food stuff from different parts of the country and the cost of certification for the authenticity of the materials add up. Hence, by the time it gets to the shop shelf, organic food is costlier by 30 to 40 per cent. Processed organic foods like sugar and oil cost even more.”

So who benefits?
Does the benefit of this higher price get passed on to the growers who toil to produce this food? “No,” reveals Iyer Venkat, who traded his corporate job to take up organic farming near Mumbai four years ago. He recounts how a specialty food store in Mumbai offered him Rs 200 for a litre of cold-pressed organic sesame oil and retailed it at Rs 180 per 250 ml, nearly four times the price it offered Venkat.

“I understand that there are inventory carrying costs for an establishment and that branding costs money, but is it justified to charge the consumer four times the price paid to the grower?” he asks.

This is so because the farmer cannot sell his produce (organic or otherwise) to the consumer directly in the city. He has to sell it in the Agriculture Produce Market Committees (APMC) where cartels of middlemen operate to keep prices paid farmers low. “Eliminate the middle man and bring in a minimum support price for products. Also, the price paid to the farmer should be set by the consumer’s capacity to pay,” argues Venkat.

Recent attempts of retail chains like Reliance and ITC in sourcing farm produce directly from the farmers has brought some cheer as farmers, for once, have an option to sell to the highest bidder. But Arun Raste, director, International Resource for Fairer Trade (IRFT), has misgivings about the farmer being the ultimate beneficiary. “Once the market stabilises there could be oligopolistic conditions and cartelisation may again push down prices to the farmer,” he says.

The way forward
Raste admits that, unlike in the west, where the consumer is willing to pay a 30 per cent premium for organic foods, the Indian consumer is very cost-conscious. The IRFT proposes to cut the supply chain for foodstuffs to minimise the role of the middleman while targeting institutional buyers like large corporates, hospitals and religious institutions like ISKCON.

Size and scale will make a difference. The Art of Living organisation has bought 25,000 acres of land in the Konkan region and Sreshta Natural Bio Products, which runs 24-Letter Mantra, has 12,000 acres of land under organic cultivation across the country. Gandhian institutions that use organic methods need to be tapped into, if overall production is to increase.

The cost of certification is another key issue. The current rate of Rs 10,000 to 15,000 per farm is high and government initiatives like group certification for smaller farmers are much-needed, says Dr PVSM Gouri, Advisor, Organic Products, Agriculture Produce Export Development Authority (APEDA).

If this is done, higher production will bring down the prices of organic food. It may not be at par with conventional food, but at least it will not be prohibitively exorbitant.

(With inputs from Ashok Das in Hyderabad, and Neha Tara Mehta in New Delhi)

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