Govt buys onions at 74% higher prices in Maharashtra ahead of state polls

In 2023, the average rate at which the Centre procured onions from Maharashtra was Rs 16.93 per kg. This year, it is procuring at around Rs 29.5 per kg via direct benefit transfer

The Centre is procuring onions at a price that is 74 per cent higher than last year in Maharashtra, India’s primary onion-growing region, according to a report by The Economic Times. The state is headed for assembly polls later this year.

The news report quoted an official saying, “While last year, the average rate at which onions were procured was Rs 16.93 per kg, this year, procurement is happening at around Rs 29.5 per kg via direct benefit transfer (DBT).”

The official added that the Centre is planning to spend Rs 1,500 crore to buy onions from Maharashtra alone this financial year.

Last year, the government allocated around Rs 1,200 crore towards onion procurement.

Market intervention and export controls

In August last year, onion prices surged, pushing up the cost of food and overall inflation for much of 2023 and the beginning of 2024. This spike caused concern for the government, which subsequently banned onion exports to control rising domestic prices.

Although the measure helped stabilise retail onion prices, it faced criticism for preventing farmers from benefitting from high international demand. In FY25, the government aims to procure 500,000 metric tonnes of onions to maintain buffer stocks at levels similar to last year. These stocks serve as a market intervention mechanism in case of price spikes, the report said.

The National Cooperative Consumers’ Federation of India (NCCF) and National Agricultural Cooperative Marketing Federation of India Ltd (Nafed), government agencies tasked with procurement, have been assigned a new target of purchasing 250,000 metric tonnes of onions each, an increase from last year’s goal of 200,000 metric tonnes.

Both organisations have acquired in excess of 200,000 metric tonnes of onions already, the source said as quoted by the report.

Due to a 38 per cent year-on-year surge in retail inflation for onions in May, the NCCF and Nafed have taken proactive steps to boost onion cultivation in states beyond Maharashtra and Karnataka. “We expect 10,000 farmers to benefit from rabi procurement of onion in 2024 against last year’s 6,100,” the official said, as quoted by the report.

Increase in onion sowing area

The Department of Consumer Affairs reported a 27 per cent increase in the onion sowing area compared to last year, with 30 per cent of the planting completed in Karnataka as of last week. This expansion is expected to stabilise prices, according to their recent statement.

Onion harvesting typically occurs during the Rabi season from March to May, and during Kharif and late Kharif from October to March. However, no harvesting takes place between June and September, necessitating the release of buffer stocks of Rabi onions to meet demand. Last August, amid rising prices, the Ministry of Finance imposed a 40 per cent export duty to curb exports.

Despite this measure, the impact was limited due to under-invoicing, prompting the imposition of a minimum export price of $800 per tonnes on onions, effective October 28, 2023.

Last year, severe rains and hailstorms in regions like Nashik and Ahmednagar in Maharashtra damaged onion crops, decreasing onion arrivals during the peak season in November. This shortage drove prices up, prompting the government to ban onion exports from December 8.