Onion Crisis: Lots of solutions in hand but implementation is critical

When it comes to onions and the crisis it faces, the government is not short of well-intended suggestions, advices and reasons. But it's time it started acting on some of them

On Wednesday, Food Minister Ram Vilas Paswan expressed his helplessness in controlling the prices of onion, citing a demand-supply mismatch. This helplessness has given voice to an issue that successive governments -- both at the Centre and in states -- have grappled with.

Numerous suggestions and reports have been made on how to tackle recurring crises and equal have been the times when such reports have been ignored and just forgotten as prices stabilise.

The current onion crisis, triggered by an almost 30 per cent drop in kharif onion acreage in Maharashtra and Karnataka, two major onion-growing states, will also be short-lived. In Karnataka, 2017-18 kharif onion acreage is around 21 per cent less than last year, while in Maharashtra, the area is around 32 per cent less.

Onion is cultivated usually thrice in a year. The biggest is the rabi crop, sown in December and January and harvested around April-May. This biggest onion crop in India contributes over 60 per cent to the total output. As it is storable, it sustains the country’s onion demand till the kharif harvest comes around October-November.

In 2014-15, India produced 18.9 million tonnes of onion; this rose to 20.9 million tonnes in 2015-16 and further to 21.7 million tonnes in 2016-17.

The price this year started firming up as the kharif harvest got delayed due to low acreage, so it is being speculated that it could stay at an elevated level for a few more days, unless a fresh crop starts coming in the next few weeks from Rajasthan and Madhya Pradesh, as there is simply no supply at present. The late kharif onion crop is sown around August and September and harvested around January and February.

The Centre decided to import onions and has already placed an order for 2,000 tonnes. But, as officials said, imported onions come in cold containers and it takes almost a month for them to be brought to a moderate temperature, else the consignment gets damaged.

The government also imposed a hefty Minimum Export Price (MEP) of $850 per tonne (around Rs 54 per kg) on November 23 to cool prices. This brought down imports -- from a daily import of around 3,000-4,000 tonnes since November 23, the imports trickled down to less than 150 tonnes a day and is projected to go down further in the coming days.

But as noted agriculture economist and Infosys Chair Professor for Agriculture in the Indian Council for Research on International Economic Relations (ICRIER) Ashok Gulati noted in his latest article, the government policies have been ad-hoc and puzzling as always.

He advocates promoting modern cold storage facilities in states like Madhya Pradesh, which has emerged as a big onion-producing state after Maharashtra and Karnataka.

He also advocated a trade policy for price stabilisation, the setting up of onion dehydrating units, and promoting demand for dehydrated onions among large consumers (restaurants, fast food chains, army, hospitals, etc).

“Gujarat has already emerged as the main centre for dehydration units, with 85 out of 100 units located there, while Maharashtra has just five units,” Gulati wrote. Besides, both the Centre and state governments' budgetary support for setting up processing units is abysmally low which doesn’t serve any purpose, he added.

NITI Aayog member and eminent economist Ramesh Chand, in a blog published in 2015, had suggested promoting onion cultivation in states like Uttar Pradesh and popularising onion production in the kharif season as well.

"It is ironical that sharp price spikes are experienced almost every third year, despite impressive growth in onion production in the country which has risen to above 19 million tonnes in recent years," Chand wrote in his blog.

He found that the primary trigger for an abnormal hike in prices are production shocks generally caused by weather-related events, while studies show that this situation is aggravated by a section of traders and middlemen exploiting the market through stocking and manipulations.

When it comes to onions and the crisis that it faces, the government is not short of well-intended suggestions, advices and reasons. But it is time the government started acting on some of them.