Thursday, December 15, 2011

Not the last word on the ‘Crate Saga’ but some food for thought

There is a lull now in the battle for crates. Bukki Johnston is now planning his next move in the New Year. He has got burnt and he is angry. I believe he must go back to basics and find out why his so called ‘Trader Mafia’ are reacting this way.

As I suggested the Govt. must order a million crates to be delivered in 2012, and agree a price with the supplier of Rs500 which is the supplier’s cost. It should then be sold to anyone who wants one at Rs250, so that there will be widespread availability of crates, and the price issue on crates can be eliminated. The cost to the government of this is Rs250 million which is peanuts compared to the fertilizer subsidy of Rs50B or two hundred times as much.

Once that issue is resolved, see how both the farmer and trader accept their use. If they think they can profit by this there will be acceptance. I know for a fact that the Rs1750 price with a huge cut for the manufacturer and the person given the govt. contract has added to the problem. Then it is the transporter and wholesaler who have to be tackled.

The increased volume is a huge cost to them, even the laborers at the Economic Centers who are paid according to the pieces they carry, will either cost a lot more and the number of vehicles required to transport will also cost a lot more. Both these will add to the cost of produce from farmgate to the wholesale market. So if Johnny maintains that the 40% wastage can be saved then say the transporter now has 20% more produce and therefore his increased cost can be matched by the increased volume. It does not work like that unless the retailer who buys from the wholesaler is willing to pay more for the vegetables so transported, which I am afraid is not going to be the case. He will say that much is wasted at his end when it is unsold at the shop front. Each one has a different agenda which does not work in tandem.

So it is better not to enforce a law that effectively impounds vegetable transporter lorries that CANNOT practically carry crates (4 lorries of the current type will be needed for the same weight) but to gently coax and encourage their use. Use the Cargills Food City example where they feel it is worthwhile as they buy direct at farmgate from a number of appointed farmers and use their own transport medium to get the produce to the stores eliminating a lot of middle men along the way. In this way they are able both to reduce waste, give the farmer better terms, get it quicker and therefore fresher to the store and the stores themselves have state of the art refrigeration systems to keep them for longer. However if you talk to Cargills they do this at a very high cost, as the transport is so much more expensive per unit as I have already mentioned, and they make up for it by saving on wastage. This is something the transporter or trader CANNOT do as they are in a middleman transporter business supplying a lorry and driver to move goods and make a profit from the difference between cost and selling price after deducting the costs of transport. This latter cost is what all the fuss is about. These transporters really believe the crates will not just eat into their profit, it will drive them out of business, as they will not be able to sell for a greater price to cover the increased transport costs, as the retailers are unwilling to pay just because less produce is damaged in transit. It is all a question of logistics, supply and demand and the costs along the food chain. You cannot fool people when it is their bread and butter.

It is plain that the government has not realized this equation and taken steps to get them thinking in the right direction before passing unreasonable laws. It is a natural way for the opposition to score a whole lot of points in making the case as I have above and explaining to the public that the most practical way to reduce post harvest loss is by attacking all the aspects and not just the crates.

It is interesting now that the list of vegetable that are not covered by the plastic crate requirement has grown substantially almost making a mockery of the legislation in the first place. It was interesting that the green chillies that now cost about Rs700 a kg has also been excluded from the requirement. In this case one MUST understand that the weight loss due to moisture loss is about 10% per day for the first 3 days from harvest. So the name of the game is to get it into the consumers’ food basket in record time for the farmer to benefit. Otherwise there is a HUGE price difference between farmgate and retail.

The Ministry of Consumer Affairs can be fooled by the farmers and traders too as the former have no clue about the nuances I have explained above. There are many factors which must be considered and NOT just the plastic crates in isolation.

In summary therefore if I was the Opposition, I would make a statement that they oppose using the law, and instead wish to encourage by reducing the price of crates to Rs250 for the whole of 2012 only, and to ask those all round to use these crates whenever they can to transport fruit and vegetables, if it can be practical. If it is impractical it also means it is not cost effective. Unless the govt. is prepared to subsidize a whole host of areas from cost of vehicles, to fuel, they do not have the right to demand this practice. Show me any country on the face of the earth that has made this a law. I don’t think there are any and why should Sri Lanka be the exception to this rule. So Johnny should be sacked and the law set aside.


Anonymous said...

Liked your closing sentence!

Rajaratarala said...

I note that 13,000 Farmer organizations are to be issued with FREE crates. A TOTALLY BAD IDEA.

The really deserving farmer will not get any. This is a politically motivated distribution, which will NOT be equitable.

They MUST make a charge and increase the distribution. If it is free the recipients will not take due care of this very delicate and valuable item called a plastic crate.

In the usual bull in a China shop way they are still courting votes from farmers and not what is right for the country.