In today’s Finshots, we dive into what on earth is going on with tomato prices and explore whether there’s a solution to this problem.

The Story

“₹100 for 1 kg of tomato. It’s more expensive than petrol.”

“McDonald’s drops tomatoes from its menu because of high prices.”

“RBI is worried about how high tomato prices will affect inflation.”

We bet you’ve all seen these headlines in the past few days. Tomato prices are through the roof and everyone’s in a state of panic. So what’s happening, you ask?

Well, everyone’s blaming a couple of things.

For starters, there’s the unseasonal rainfall in May. This damaged produce in places like Rajasthan and Uttar Pradesh. Secondly, there are some viruses that have wreaked havoc. Especially on tomato plants in Karnataka and Maharashtra. For instance, the lead curl disease has struck the farms in Kolar in Karnataka. And the local Agricultural Produce Market Committee (APMC) which received nearly 5.50 lakh quintals of tomatoes in June last year has got just 3.2 lakh quintals now.

So yeah, the supply has been hammered. But we still want tomatoes in most of our dishes and the demand remains strong.

But wait… doesn’t this also make you wonder about something else? If you jog your memory and rewind to just 2 months ago, the news was very different. Farmers at that time were actually dumping their produce by the sides of the road. The prices had crashed to just ₹2 per kilo due to an excess supply flooding the market. And farmers felt they were simply better off throwing it all away.

And the weird thing is that these imbalances happen every year. First, there’s an oversupply and farmers dump tomatoes. Then there’s an undersupply and consumers suffer. So you have to ask — what’s the solution to this annual tomato conundrum?

Well, truth be told, no one seems to have an answer. Even the government is scratching its head. And things have gotten so desperate that we even launched a ‘Tomato Grand Challenge Hackathon’. The government is trying to crowdsource ideas from the public now.

So in the meanwhile, we thought we’d lay out what we’ve found out.

Let’s start with the bit about storing excess tomatoes.

See, tomatoes are produced pretty much throughout the whole year and across the country. And the production seasons are also different across regions. For instance, what’s grown in Karnataka and Andhra Pradesh typically hits the market between March and August. And from September to February, we have places like Uttar Pradesh and Maharashtra chipping in.

So the simplest solution will be to store the excess tomatoes that grow seasonally in different parts of the country for when we need them, right? The government could intervene by enabling smooth transportation and distribution of these crops to other states.

But that’s easier said than done. The problem is that tomatoes are highly perishable. Even with cold storage, they don’t survive for too long. Just around 2 weeks. Unless kept at the right temperature and humidity, it gets damaged quickly. Maybe that’s why as an article in Financial Express pointed out a few years ago, 90% of the available cold storage for veggies are used for potatoes.

But maybe there’s a simpler solution for storage?

See, back in 2020, there was this news doing the rounds about storing tomatoes in brine. Apparently, the Mysuru-based Central Food Technological Research Institute (CFTRI) developed a simple method where tomatoes could be stored at room temperature for just ₹3 a kg. All by using a simple brine solution (salt-based liquid). They were apparently working with the government of Karnataka to roll this out.

But since then, we haven’t found any more details on the progress. Could it be time to revisit this?

Then there’s the part about how we consume tomatoes.

See, Indians love to use fresh tomatoes as an ingredient in their dishes. We’re not big fans of using ready-to-use tomato puree and paste. In fact, only 1–2% of the cultivated tomatoes become paste, sauce and ketchup.

But what if we can convert tomatoes into purees when we have excess supply?

Kind of like how Amul started converting excess buffalo milk into powders and butter back in the day. And agricultural economist Ashok Gulati thinks that at least 10% of fresh tomatoes need to be processed into purees to keep the prices in check. And to get people to shift their allegiance to this form of tomatoes, maybe even cut the GST rate on it from 12% to 5%.

The problem with this suggestion is that this would mean a complete shift in behaviour. Indians using puree instead of actual tomatoes? Kind of unimaginable no?

Finally, there’s the Agricultural Produce Market Committee (APMC) or mandi problem.

Think of this as a marketing committee set up by each Indian state government. Here, farmers come together to sell their produce through an open auction. Buyers check the quality of vegetables, fruits and crops and place their bids. The one with the highest bid gets the lot. And that’s how most of the prices are decided across states.

But there’s a problem with these APMCs. These auctions happen through agents who also take a cut before passing on the remaining to the farmers. In fact, some estimates say that farmers just get 30 paise out of every rupee spent by consumers on tomatoes. The mandi fees and commission take away a chunk of it.

Yeah, it’s a controversial situation. And some folks think that we need to clean up this APMC system. That’s the only way we can at least reduce prices in times of distress.

Otherwise, the state governments might have to intervene each time. Like what’s happening in Andhra Pradesh and Tamil Nadu now with the government either subsidising prices or keeping a lid by working directly with Farmer Producer Organisations.

So yeah, that’s what we had to say about this matter. Now tell us what you think about tomatoes.

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Until then…