Rising onion prices bringing back tears

In a span of less than four months, retail prices of onions have once again started moving upwards.

Since June, as per the data furnished by the department of consumer affairs, the retail prices of the tear-jerker vegetable in most major cities across the country have risen by almost Rs 5 to Rs 10 per kilogram. In Delhi, the retail price of onions doubled from from Rs 10.50 per kg in June to over Rs 20 per kg now. In fact, in August alone retail price of onion has gone up by Rs 3-4 per kg.

The price spiral is largely because of hoarding by farmers as they are releasing their stocks slowly in anticipation of further rise in prices. This has further aggravated the shortage which was expected because of the 10-15 per cent drop in kharif onion acreage this year. National Horticulture Research and Development Foundation (NHRDF) said the area under early kharif onions will drop because of low initial rains in Maharashtra and Karnataka — the country’s two main states that grow the bulbous vegetable.

In Maharashtra, which produces more than 30 per cent of the country’s annual onion crop, acreage under early sown kharif onion crop has dropped by 15-20 per cent, the Nasik-based NDRDF said in a report.

In Karnataka, the area and production of onions is expected to be at least 50 per cent as compared to the same period last year. Till the middle of July, the southwest monsoon was almost 25 per cent below normal in some parts of Maharashtra. The India Meteorological Department said rains over much of southern India till mid-July were almost 6 per cent below normal.

In 2010-11, onions were sown in 414,000 hectares in the entire last year, while in Karnataka the crop was sown in around 148,000 hectares. This year, experts foresee a 10-15 per cent fall in production that could bring down production by at least 5 per cent. Onion is usually cultivated four times in a year — early kharif, kharif, early rabi and rabi.

Currently, the domestic demand for the crop is met through stocks stored in various warehouses across the country. Thanks to good production last year, onion stocks in the country are almost 10-15 per cent more this year. This has prevented the situation from going out of control.

In 201-2011, the country produced around 1.48 million tonnes of onions in 2010-2011, which was 24 per cent more than the previous. Of the stored onions, almost 30-35 per cent has already exhausted, while the remaining should be available till the middle of November. After this, the kharif harvest will start coming into the market.

This should cause some concern as festivals like Dussehra and Diwali will fall during the intervening period.

A worried government, which was reducing the minimum export price (MEP) of onions ever since the ban on exports, was removed in February this year, took a U-turn since June as retail prices started moving upwards. Since June 8, the MEP of onions was raised four times, the latest being on Wednesday. From a low of $170 per metric tonne, the MEP of onion now stands at $300 per tonne, even though exports were less as compared to last year.

Official figures show that till July 2011, the country had exported 452,409 tonnes of onions, almost 34 per cent less than the same period last year.

However, last year’s experience has made the consumers jittery about slightest spike in prices. That time the retail price of onions zoomed to almost Rs 90 per kg in some centres owing to damage to standing crop in Maharashtra. The spurt in onion prices then led to the constitution of an inter-ministerial group on inflation.