Despite govt’s efforts, why onion prices remain high | Explained News
3 min readDespite a virtual ban on exports and creation of a buffer stock, onion prices seems to show no sign of softening. In most metro cities, the bulb has touched the Rs 80/kg mark, with more escalation expected. A look at why repeated interventions by the government have failed to cool down the price of the kitchen staple.
In the past few months, the central government has taken repeated measures to control the price of onion. In August, an export duty of 40 per cent was imposed to increase its availability in the domestic market. However, though the move throttled the export pipeline, onion continued to report escalation in prices both in the wholesale and retail market. Thus on October 28, the government fired another salvo and imposed a Minimum Export Price (MEP) of $ 800/tonne . This translates into Rs 67/kg as the base price of exports. In effect, the small trickle of exports which was on for Bangladesh also came to a grinding halt.
These moves come even as the government has effectively formed a buffer stock of 5 lakh tonnes of onion with agencies like National Cooperative Agricultural Marketing Federation(NAFED) and the National Cooperative Consumer Federation (NCCF), wading into procuring onion at the farm gate. An official statement issued by the Press Information Bureau (PIB) said the government till October 28 had offloaded 1.70 lakh tonnes of the procured onion and has plans to procure 2 lakh tonnes more. India on an average produces 250 lakh tonnes of the bulb with the domestic consumption pegged at 160 lakh tonnes.
Why prices are still rising
Lasalgaon’s wholesale market responded to these moves but not to the extent the government would have wanted to. Thus on October 28, average traded price of the bulb was Rs 4,800/quintal which came down to Rs 3,650 on November 3. At the retail end, onion prices continue to be high with most cities reporting the price range of Rs 70-80/kg for the bulb. Located in the Niphad taluka of Nashik district, Lasalgaon is the largest onion market in the country and is a price setter for the bulb.
Late arrival of the monsoon and extensive damage to the harvested crop earlier in the year is responsible for the higher than usual onion prices in the market. Farmers in Maharashtra harvest their rabi onion post March, after sowing the same in December-January. This onion, which has low moisture content, is amenable for storage, with the growers storing them in covered structures called kanda chawls to protect them from moisture ingress and heat. However, this year, this crop was extensively damaged due to unseasonal rains and hailstorm in March. Trade estimates say around 60 per cent of the onion meant for storage was damaged, and was offloaded by the farmers in April-May at throw away prices.
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Delayed monsoon has seen delay in the transplanting of the kharif crop in June, which was supposed to hit the market by October. Also the late kharif crop, which is transplanted normally in September, was delayed. Thus, at present, the only available onion in the market is the stored rabi crop. This severe supply chain mismatch is the cause of the present price rise. While the government has claimed to create buffer stocks, the quantity is far less than the requirement
When will onion prices stabilise?
Indications from the markets do not offer any positive prognosis about a quick resolution of the price rise. At Lasalgaon’s market, the kharif onion (called Red or Lal kanda in Marathi) has started arriving but its quantity is too small to make a mark. Thus, on an average, the arrival of the new onion is between 10-50 quintals while the old stock continues to form the bulk. Traders and farmers have ruled out any change in trend soon.
“At present, most farmers are liquidating their old stock. The new crop is yet to be harvested. The situation will improve only towards the end of the month when arrivals will improve,” said a trader from the market. Till then, onion prices would continue to be high, much to the discomfort of both the consumer and the government.