Unveiling cost breakdown of vegetable supply

The supply chain of vegetables has been fraught with extortion and middlemen, forcing consumers to pay too much and depriving farmers of a fair price for their produce.

Money has to be paid at different stages of transporting products from farms to consumers’ tables.

This was revealed in an investigation carried out by the Bangladesh Shop Owners’ Association on irregularities in the product supply system.

 The nine-page report on “Vegetable Price Differences at Producer and Consumer Levels: Analysis, Causes and Remedies” has revealed various patterns of irregularities in the supply chain.

According to the report, over 156 types of vegetables are produced out of which 29 are first in the food list. Among them notable are cauliflower, cabbage, brinjal, radish, tomato, beans, sweet pumpkin, gourd, lady’s finger, luffa, and yardlong bean.

Helal Uddin, president of the Bangladesh Shop Owners’ Association, told the Daily Sun that money has to be paid at different spots to reach the products from farmers to consumers.

If this cost can be reduced, the consumers can get the products at an affordable price, he said, adding that if specialised trucks are arranged, the cost of transporting goods will be reduced.

Barriers to direct selling

If farmers want to sell their vegetables directly to the local wholesale market, they have to go through middlemen and agents who form an “invisible” syndicate, fixing a price for the products.

And, if a farmer does not sell his products at those prices, his produce remains unsold and gets perished.

According to statistics, 40.62% of people produce agricultural products in the country. Around 63.37% of people live in villages, of whom, 5% produce vegetables, 47% produce other agricultural products and 11.37% are involved in something else.

Identity of the middlemen

According to the Shop Owners’ Association, extortion is primarily collected from trucks carrying goods under the guise of political affiliations. Additionally, city corporations, municipalities, ferries, weighing stations, transport organisations, labour unions, and police officers are involved in extorting money before the products reach their final destinations.

According to the report, individuals affiliated with political parties carry out around 300 instances of pavement extortion in Karwan Bazar. Extortion occurs in six distinct phases within the bazaar, involving pavement workers, unloading staff, utility workers, cleaners, commission agents, and corrupt police officers.

The report indicates that pavement extortion is imposed on a monthly, weekly, daily, or even hourly basis, with costs varying depending on the circumstances. If goods remain unsold, they must be moved to warehouses, incurring additional fees upon their return for sale the next day. Law enforcement personnel and locally influential people must also be appeased to ensure smooth business operations.

According to truck drivers interviewed for the report, the cost of unloading a truck ranges from Tk10 to Tk20 per bag, increasing from Tk30 to Tk35 for heavier loads. There is no way to evade these altogether.

Invisible extortion

A new form of extortion, termed “invisible extortion”, has emerged as a concerning trend, according to the report. Instead of openly paying extortion fees, there has been a rise in clandestine payments.

Under this practice, a monthly extortion fee is levied on each truck, indicated by a three-letter code displayed on the truck’s door, signalling to the relevant extortionists that the money has been paid. Additionally, extortion payments are now facilitated through mobile banking channels.

Product supply cost

The Bangladesh Shop Owners’ Association analysed the expenses involved in supplying 11 tonnes of vegetables from Bogura’s Mahasthangarh to Dhaka’s Karwan Bazar until the point of sale.

The breakdown revealed that transporting goods from the source market to the truck incurs a cost of Tk2,250, while warehouse expenses amount to another Tk2,250. Leaseholder charges come to Tk500, with highway extortion fees totalling Tk1,500. Additional expenses include Tk1,000 for truck driver commission, political and administrative costs associated with labour unions, and Tk1,500 for unloading the products.

Moreover, there are costs related to Karwan Bazar’s cleaning staff (Tk300), travel and accommodation to mokam (wholesale warehouse) (Tk1,500), footpath usage in Karwan Bazar (Tk1,500), lineman charges (Tk500), and truck fare (Tk22,000).

Overall, the total cost of transporting 11 tonnes of vegetables from Mahasthangarh to Karwan Bazar amounts to Tk34,800. This translates to a supply cost of Tk3.16 per kg.

Assuming an average purchase price of Tk25 per kg for vegetables, the total cost of the product, including supply costs, stands at Tk28.16 per kg. With a 15% profit margin, the selling price per kg is estimated at Tk32.38. Accounting for an average unsalable product rate of 5%, the wholesale price of the product per kg is calculated to be Tk30.98.

How does the cost increase in Dhaka?

Money is also extracted from rickshaw vans transporting goods from Karwan Bazar to various kitchen markets. This includes fees per goods-laden rickshaw van, rickshaw van fares, charges for seating in local markets, extortion by traffic police along the route, water and electricity costs, losses due to rotten goods, cleaning expenses, and wages for workers carrying products to the point of sale, as well as labour costs for two assistant sellers.

The analysis reveals a significant escalation in the price of products from farmers to consumers, soaring from Tk25 to over Tk58 per kg, more than double the original price.

The report also sheds light on the constraints faced by farmers in product production. Challenges such as fertiliser and fuel shortages, inadequate storage facilities, transportation costs, long distances to middlemen, limited marketing opportunities, insufficient capital, and a lack of cooperation among area-based farmers are emphasised.

To address these issues, the organisation suggests decentralising the market system. They propose that government intervention in transportation initiatives could yield benefits. Furthermore, they advocate for controlling the influence of middlemen and facilitating direct sales for marginal farmers in Dhaka. Additionally, they stress the importance of organising transportation for small farmers through cooperatives.

Helal Uddin, president of the Bangladesh Shop Owners Association, said that unless farmers receive fair prices for their products, production will not increase. He warns that failure to support farmers could lead to a crisis.