If a recent paper is anything to go by, vegetable farmers have done better selling their crop to collection centres that procure for private supermarkets than in traditional markets such as mandis. One reason supermarket collection centres offer higher prices is that ‘transaction costs’ there are lower, by around 70%. These are the additional costs farmers incur while selling their crop—such as charges for transportation, bagging and loading. So higher prices incentivize farmers to continue selling to centres, instead of in traditional markets, and ensures a regular supply. The authors acknowledge that supermarkets may be offering higher prices only at the beginning, and might lower their rates once farmers get ‘locked in’.

Source: Mint October 20, 2020 04:41 UTC