Onion buffer dampens govt ardour

Storage loss of 40% compounds 70% fall in price after procurement begins

The government’s onion market intervention plan under the Price Stabilisation Fund Scheme (PSF) has gone for a toss, due to a sharp fall in prices, following a bumper harvest this year. The government faced a double problem in building an onion buffer stock of 17,680 tonnes.

Due to high moisture content at the time of procurement, and poor storage, around 40 per cent of volume loss is estimated. Then, the price crash forced the government agencies to sell procured onion at a third of the procurement price. In March, the Union ministry of finance asked the department of consumer affairs (DCA) to start procurement of onion from the open market to create a buffer stock of over 15,000 tonnes.The Unioin Budget had made a Rs 500 crore allocation for the PSF, for procurement of 'sensitive' commodities that threatens a risk of price rise.

DCA, part of the wider ministry involving food and public distribution, appointed two government arms – Small Farmers’ Agribusiness Consortium (SFAC) and National Agricultural Cooperative Marketing Federation of India (Nafed) – to start procurement at the market-driven price. SFAC and Nafed entered the major wholesale markets at Lasalgaon and around in the Nashik district of Maharashtra, procuring 12,500 tonnes and 5,180 tonnes of onion, respectively. The price was first between Rs 13 and Rs 15 a kg; Nafed, which entered later, claims it paid an average of Rs 8.26 a kg. “The entire quantity is stored in chawls owned by Nafed, government and also private players. Nafed incurred a storage loss of 20-25 per cent. The actual loss figure shall be derived after disposal of the entire quantity, for which the process is still on,” said a Nafed spokesperson.

Trade sources in Nashik believe a large quantity of the stored onion by the two agencies has rotted. V R Patel, Nafed chairman, admitted storage loss could cross 40 per cent in some cases.

An audit process is on at SFAC but a senior official there also estimated storage loss at 40 per cent. It has started selling onions through Safal and other retail chains, apart from market sales. Nafed has started liquidation of stocks through up-country centres.

“The government went wrong on analysis, estimating high prices during the lean season of August and September. In fact, onion prices had slumped since April. Since new season arrivals have started, there is no possibility of the price to go up from the current level. So, the cost bring incurred on storage is further loss,” said a Nashik-based trader.

The sharp fall in price can be attributed to record output, estimated at 21 million tonnes this year, as against 18.9 mt the previous year.

Nafed has proposed to set up a modern and onion-specific cold storage of 5,000 tonnes in Delhi at an investment of Rs 40 crore, specifically for market intervention in case of price rise. Such a cold storage will reduce storage loss to around one per cent in a year, it has said.