Onion farmers languish even as traders ride on arbitrage to double profits

Modus operandi: Buy in Lasalgoan at Rs 4 a kg, sell in the north at Rs 11-13

Labourers sorting onions. Most farmers in Lasalgaon in Maharashtra's Nashik district aren't even able to recover the bare cost of productionOnion traders in the Lasalgaon district of Nashik, Maharashtra, have found an arbitrage opportunity in transporting the bulb to north India, mainly Punjab.

Onion traded on Friday between Rs 3.50 and Rs 6 a kg in the Lasalgaon mandi, the largest spot market for onions in Asia. This price is sharply lower than the estimated cost of production of Rs 5 a kg. Most farmers in Nashik are incurring losses on their onion crop.

Onion prices have fallen by Rs 2 a kg, or 29 per cent, this year on a bumper harvest. Arrivals in Lasalgaon jumped sharply to 4,366.5 tonnes on Friday from 3,425.9 tonnes early this year.

Traders are transporting onions from Lasalgaon to Punjab and Uttar Pradesh, where the vegetable is selling at Rs 11-13 a kg. Procuring onion at Lasalgaon for Rs 4 a kg and incurring additional labour and transportation cost of Rs 2.5-3 a kg, a trader can earn Rs 5-7 a kg.

Farmers in Lasalgaon can not avail this opportunity, having committed to selling their produce to financiers or traders.“The Maharashtra government should help farmers get better prices. Faced with having to sell their produce at Rs 3 a kg, two farmers have committed suicide in Lasalgaon in the past few weeks,” said Hansaraj Patil, president of the youth wing of the Maharashtra Shetkari Sanghatana.

Since export demand is weak and the shelf life of onions is low, prices are likely to remain in this range, according to Atul Shah, director, Agricultural Produce Markets Committee, Pimpalgaon.