Onion prices on roller coaster, centre says worst over

Onion price in Maharashtra rose to Rs 3,511 per quintal on November 23, the highest this season. It dropped to Rs 2,452 per quintal on November 30 that led to the government claiming a softening trend has started. Within a week it shot up to Rs 3,300 a quintal on December 6.

The roller coaster ride of onion continues. Rates in the mandi at Lasalgaon, in Maharashtra, averaged Rs 2,900 a quintal on December 8. A flabbergasted government looks for options how to manage retail prices which are not getting influenced by the up and down in mandi at the production hub in Maharashtra.

Mandi prices

In Delhi, which is the largest market for onion trade, the retail prices range between Rs 50 and Rs 80 for every kilogram. In the normal case, the mandi prices of onions in Delhi are higher than the rates in Lasalgaon of Nashik district which is at the centre of the country’s production hub. However, average mandi prices in Delhi were about Rs 500 a quintal lower than what prevailed in Lasalgaon during October and November. This is despite the arrival of onions in Delhi was substantially lower year-on-year.

Food minister Ram Vilas Paswan said on November 29 that onion prices, retailing at Rs 80/kg, would soon start coming down with the arrival of fresh crop from Rajasthan and Madhya Pradesh. The total area sown to onions during the kharif season of this year has been lower at 1.90 lakh hectare from 2.65 lakh hectare a year ago, indicating likely drop in the output.

Although the kharif output is likely to be lower this year, the government is taking concrete steps to boost supplies and curb further rise in prices, he had said. Besides imports, the availability of onions is being improved in the country through direct sourcing of the crop from farmers for distribution in consuming areas, he added.

“We have requested the Maharashtra government to procure 10,000 tonnes on behalf of the Government of India for distribution in Delhi and other cities,” Paswan had said after reviewing the situation arising from high onion and tomato prices.

Paswan had also said that the Delhi government has been told to consider Nafed's proposal to procure onions for distribution through ration shops in the national capital. Price rise in onions is a matter of concern, he said, adding the Delhi government has formed an enforcement team for the purpose.

Asked by when the prices will come down, Paswan said: “We have seen some price correction in wholesale rates at Lasalgoan in Maharashtra. Prices are driven by supply-demand fundamentals and the ministry has a limited role to play.”

The government needs to start ‘Operation Veggie’ with focus on tomato, onion and potato to ensure stability in prices of these essential kitchen items, experts told the finance minister earlier this week during the customary pre-budget consultation meeting.

Farm income

Union finance minister Arun Jaitley has said that there is a need to conserve water, incentivise agro processing and promote balanced use of fertilisers to ensure higher agriculture productivity. In order to achieve the goal of doubling farmers' income by 2022, there is a need for better storage and marketing facilities for the produce so that they get higher prices, he said.

Except sending statements through the media that prices would drop, the government has very little in its hands to bridge a demand-supply gap in onion, which can be imported either from China or Egypt if there is a surplus there. The market dynamics play in full force in years of shortage as well as surplus.

India has seen onion prices touching Rs 100 a kg in a year of deficit production and when there is abundance output, farmers received Re 1 per kg, as recently as in July this year. Chief Economic Advisor Arvind Subramanian said the government would take action to contain their prices as onion and tomato rates have gone through the roof at most places.

Also, Nafed and SFAC have been asked to source locally 14,000 tonnes of onion from producing areas for distribution in consuming areas. State-owned MMTC has floated a tender for the import of 2,000 tonnes of onion. The stock holding limit on onion traders has been extended till December-end to check hoarding. Exports are restricted by imposing minimum floor price of $ 850 per tonne.

Fresh crop

Onion and tomato prices are expected to cool down in retail markets in the next 15-20 days with the arrival of a fresh crop, according to agriculture secretary S.K. Pattanayak. He termed the price rise as a “temporary problem” and hoped the situation would improve shortly.

The irony of the onion problem is that no government has been able to find a long-term solution to it. The BJP lost the Delhi assembly election to the Congress when Atal Bihari Vajpayee was the prime minister. During UPA rule too, onion prices kept rising when there was a lower output. In 2015, with Narendra Modi as prime minister, onion prices rose to Rs 80 a kg. His food minister made a candid admission that that he had no option left to bring down prices in a year of shortage.

Is there no solution to the onion price rise problem? Should the people accept it as a natural calamity when prices skyrocket? Why is the government not distributing relief when it admits that it has little option left?

These are some of the questions that Niti Aayog must find out as the advisory body is meant for this type of exercise. In 2015, it has suggested expansion of the area under onion cultivation in Madhya Pradesh with government support so that in case of failure of crop in a season in one pocket could not disrupt the prices.

However, when farmers in Madhya Pradesh grew onion at the insistence of a government campaign, they got Re 1 per kg, which did not even cover the cost of labour used for harvesting.

Since farmers are increasing areas under onion cultivation, the stability of rates can be managed if and only if the government guarantees a minimum price to farmers during surplus years. No matter whatever money is required, the government has to intervene and buy all the crops coming to its own agencies just to ensure farmers get minimum rates. When calibrated release from the stock will be made, the prices would not collapse either. But the moot question is when the government will act, if at all it has to.


Prabhudatta Mishra