Kanda Express: How onion-laden trains impact farmers, consumers, traders

Onion procurement for the first train was done by the National Cooperative Consumers Federation of India Ltd and for the 2nd by National Agricultural Cooperative Marketing Federation of India Ltd

On October 20, the Central government pumped 1,600 tonnes of onion into Delhi and adjoining markets to cool prices ahead of the festivals. The consignment came from Nashik in a train of 42 wagons euphonically called the Kanda Express — Kanda is Marathi for onion.

 

This was one of the largest-ever wholesale interventions by the Centre in onion. The stock was sold through auction at a base rate of Rs 35 a kilogram (kg). Government sources say the average cost of procuring from farmers was Rs 28 a kg, up from Rs 17 last year. 

Similar arrangements were made for transportation of onion in bulk to Lucknow, Varanasi, and north-eastern states includ­ing Assam, Nagaland, and Manipur. 

 

Nashik, in Maharashtra, is one of the country’s largest onion trading centres. State polls are around the corner. The government has also eased the export curbs on onions, which would shore up its prices. 

A second similar train, carrying 840 tonnes of onions, reached Delhi a few days back. Onion procurement for the first train was done by the National Cooperative Consumers Federation of India Ltd (NCCF) and for the second by National Agricultural Cooperative Marketing Federation of India Ltd (Nafed). 

Wholesale prices of onion in Delhi’s Azadpur mandi have declined by almost 7 per cent since October 22. Not only that, the Centre says onion prices in the wholesale markets of Nashik declined from the peak of Rs 47 a kg on September 24 to Rs 40 a kg on October 29. 

In addition to Delhi, Nafed transported 840 tonnes of onion by rail rake from Nashik to Chennai, which arrived on October 26. Another rail rake was sent from Nashik to Guwahati with 840 tonnes of onion procured by NCCF. 

The government had procured 470,000 tonnes of rabi onion for the price stabilisation buffer this year and started liquidating the stock from September through retail sales at Rs 35 a kg and through bulk sales in major mandis across the country. Till a few days back, 140,000 tonnes of onion in the buffer had been dispatched from Nashik and other centres to consuming centres through road transport. NCCF has covered 104 destinations in 22 states and Nafed 52 destinations in 16 states. 

The agencies have partnered with retail chains such as SAFAL, Kendriya Bhandar, and Reliance Retail for distribution. In addition, 86,500 tonnes of onion have been allotted to state governments and cooperative societies for retail distribution. 

What Delhi traders say 

“What is happening is that small traders and truckers are not loading much onion from Nashik as they are making a loss due to the bulk intervention,” Surinder Budhiraja, a trader from Delhi’s Azadpur mandi, told Business Standard. 

In the Nashik belt, good quality onion is selling at around Rs 45 a kg, but in Delhi prices have come down to below Rs 40, causing traders losses of around Rs 5 a kg in transporting onion. Some of them have therefore curtailed supplies. Usually, 50 to 60 trucks each carrying around 30 tonnes of onion reach Delhi’s Azadpur market every day, but in the last few days this has come down to 24-25 trucks. 

“Moreover, new crop supplies from Karnataka have started, which are selling at a discount as their quality is bad due to relentless rains. All, this is keeping the price drop under check,” said Budhiraja. 

A recent Reserve Bank of India working paper says that in the case of onion, farmers mostly sell their produce in the Agricultural Produce Market Committee (APMC) mandis, where prices are determined through open auction. Farmers incur overhead costs such as labour charges and of transportation to mandis. Once the auction is successful, it is bought by traders, who pay the mandi fees (1 per cent), commission agent’s charges (4 per cent), and loading and unloading charges of Rs 9.02 a quintal. They also incur packaging charges and costs due to weight loss, which is around 10 per cent for kharif and late kharif onion, and 5 per cent for rabi onion. 

Traders get into agreements with wholesalers (secondary traders) at APMC mandis such as Azadpur in Delhi, and depending on the arrangement, transportation cost of about Rs 240 per quintal is paid by either the primary trader or the wholesaler. Mandi fees and commission charges are also paid by the seller. 

After the consignment reaches the secondary mandi, the produce is bought by retailers who sell it in the neighbourhood markets in urban areas.

 

Ongoing saga 

Price volatility in onion, just like the other two in the TOP (tomato-onion-potato) trio, is an ongoing saga. Onion production is concentrated in the western and southern states of India, particularly Maharashtra, Madhya Pradesh, Karnataka, Gujarat, and Rajasthan, which account for 80 per cent of the production. Consumption is across India. 

According to the RBI paper, onion production in India is spread across three seasons: Rabi, which is harvested in March and May and accounts for 77 per cent of production; kharif, harvested between October and December and accounting for 14 per cent of production; and late kharif, harvested between January and March and 9 per cent of production as of 2021-22. 

Only rabi onions can be stored between March and October in storage units, which are made using bamboo and asbestos and are open on three sides. Most farmers in Nashik use these structures. Storing onion during this period is key to controlling inflation in India. 

Around 70.4 per cent of onion farmers are small and marginal, having an area less than two hectares, thereby making them most vulnerable to price shocks. A considerable amount of onion is also exported from India: During 2015-16 and 2018-19, India exported 9 per cent of its production on an average. About 2-3 per cent of onion production is processed in dehydrated form, such as onion flakes, granules, and powder. 

However, just like in the case of other perishable commodities, the RBI paper says, farmers’ share in the price consumers pay for onion is among the least, at around 36.2 per cent. This includes cultivation and overhead costs. 

Traders’ mark-up of 17.6 per cent and wholesalers’ mark-up of 15 per cent include cost of transportation, mandi fees, commission charges, packaging, and labour charges. The retailer has a mark-up of around 31.3 per cent. 

Onion suffers from multiplicity of players between the farmer and final consumer. Unless that is addressed, the constituents at the two ends of the value chain will continue to bear the pain of volatile prices.