Scarcity, fruitless govt measures to keep onion prices high for a while

The vegetable is currently trading at a three-year high of Rs 40 a kg at the largest Onion mandi in Lasalgaon, Maharashtra

The consumer will have to live with high onion prices for the time being due to scarcity in the market, and the ineffectiveness of the several measures taken by the government to address the situation. Yesterday, Union Minister for Food and Consumer Affairs, Ram Vilas Paswan, warned that he would impose stock limit on the vegebtable.

The series of measures taken in phases by the central government during the past 10 days follows a sharp increase in onion prices in the past one month, from Rs 13 a kg in the beginning of August to a three-year-high of Rs 40 currently, at the largest Onion mandi at Lasalgaon in Nashik, Maharashtra. The state produces a third of the country's onion output.

Asserting that the stock of onions in Maharashtra were sufficient to meet current demand, Paswan said, "Supplies are apparently being restrained to jack up prices. The government is dipping into the Central buffer in order to improve supply mitigate the shortfall, and will also consider imposing stock limits if prices do not moderate due to speculative behaviour on the part of traders.”

His statement follows several measures such as restricting exports and releasing buffer stock. The government also said, “The reported export below Minimum Export Price to Bangladesh and Sri Lanka will be stopped immediately and strict action will be initiated against those found to be violating this decision of the government.”

Experts however, don’t see prices coming down so soon despite all the action. A senior government official said onion prices fell to Rs 5 a kg and below ahead of rabi season sowing in January. This has forced some farmers to shift to other crops. But more importantly, there was heavy crop damage due to late rains this season followed by the downpour in Maharashtra and Karnataka, which together produce half the country’s onions.

Karnataka crop arrives early in August and September, and feeds Maharashtra till local the crop starts arriving in October and November. However due to heavy rain and damages, supplies from the neighbouring state were affected, causing prices to soar, said the official quoted earlier. A large exporter endorsed this view.  

One trader said, on condition of anonymity, that some farmers and traders have stored onion and are releasing it slowly in the market, as they had incurred losses in last season due to sharp fall in prices. “if stock limits are imposed this inventory will start coming to market, but with no let-up in overall supply deficit till the Maharashtra crop arrives post Diwali, prices will not fall much.”

India produces about 23 million tonnes onions. With the price of the vegetable reaching as much as Rs 60 a kg in Mumbai, several restaurants have reduced or stopped serving onions.

Globally, countries like China, Egypt, Turkey, Russia have enough onions and Indian traders can import and sell at about Rs 35 a kg, but they are worried that if any procedural issues hold up clearance of their imports at the Customs, like in 2017, then they may end up incurring losses,” said Ajit Shah, President, horticulture products Exporters Association.