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Case of a potato, food park, potato chips ,the humble wada-pav and the farmer.

This would be a shortish blog post about the politics behind the humble potato and what I have seen around me.

For number of years farmers have been doing suicides in India and governments shed crocodile tears. It became a big story last week when 2 farmers took their life. The prince-ling Mr. Rahul Gandhi said that there was going to be a food park in Amethi and the current BJP dispensation is against that and going to close it down when it comes that the so-called plant hasn’t even been built. It seems that it was supposed to come something like 6 years back but till date not a single brick has been put up. While I don’t want to get into the politics of it, I very well understand the economics of it.

The whole thing started about 7-8 years back when a farmer approached Mr. Gandhi saying that we sell potatoes @Rs. 2/- per kg or thereabouts and my son bought this packet of potato chips for Rs. 10/- . A kilo of average medium potatoes would have something like 7-8 potatoes in it. As I do weekly shopping know that. Also one packet of potato chips/wafers has only one potato so for one kilo of wafers you are paying somewhere around Rs. 75/- to Rs. 80/- per kg. while the raw material cost is even less than Rs. 2/- because that cost is of the average medium potato, in the chips/wafers packet you also get that ‘chiwda’ or broken pieces which are made from small potatoes which are cheaper even then Rs. 2/- so cost of raw material is less than Rs. 2/-. Now the other argument supplied is that this is/was not feasible if gas is not given at concessional rates. I do not know who made the business plan/case then and let me share the reasons for the same.

I am taking a local entrepreneur Mr. Shailesh Joshi, of Joshi Wadewala who entered the fast-food world of Vadapav around 10-15 years back. As can be seen he doesn’t have much, around 11 branches of Wada Pav strung around the city, one of the first ones near my home. While the recipe of the Vadapav is no secret as can be seen from the link there, he has been serving the same to Puneties over the last decade or so. Now the inputs for the Vadapav are much more than the humble chip pack. He buys gas at commercial rates as I have seen commercial gas cylinders coming in and out over the years, he would like to have a direct gas pipeline as many including us would but that’s a different story altogether. The input cost has also besan + oil and know that he uses good oil + he has around 15-20 employees in each branch and most of them are paid well as many of them have stuck with him for number of years. Even if we take the labour out of the equation, the input cost of the Vadapav is much more than a pack of chips 1:1 basis. Now let’s share for how much he sells the Vadapav, the Vadapav when he started to sell was @Rs. 5/- per unit, which was slowly increased to Rs.8/-(inflation, cost of materials, labour etc.) and as of date is at the rate of Rs. 10/- per unit. Now during interim he was able to make enough money to buy a car, a good house, some land and some investments. He pays water and electricity at commercial rates as well which is needed by his customers as well. Also, he has bought most of the places where the branches so he could extend his business with other food products as well thereby extending his client range as well.

Now when an entrepreneur is able to do so much, why can’t a food park function. Some will say that I am not thinking of the scale of the operations but I am. As an entrepreneur he has to pay taxes and possibly over and above whatever official rates might be to make sure the operation is running but he is still able to turn a profit to sustain not only himself but around 100-200 families with him. While I do not know the intricacies of a food park, if it is modelled anything like software technology parks are then you have something like 8-10 years of tax holiday. Also that food park would probably be quite a bit of automated park with less or little human intervention vis-a-vis the mostly manual operation done at the Vadapav seller stage. In addition to that, they don’t need to have an 18 hour operation but can have a 24 hour operation like most factories do. This clearly smacks of ineptitude, inefficiency at the very least and taking people for a ride at a more extreme end. I wish the plans for the food park would be in public domain as it is our money through which such a food park would happen but know that it probably will not happen in my lifetime.

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