Rains keep onion prices up despite govt's ban on exports, shows data

Almost a fortnight after the central government banned the export of onions to check a spike in retail pri­ces, the situation on the ground is yet to see drastic change. This has again prompted some experts to question the effectiveness of fr­e­quent bans on export of commo­dities. Data sourced from Depart­ment of Consumer Affairs and agmar­knet.gov.in shows that retail price of onions in Delhi and Mum­bai on September 27 was over Rs 50 a kilogram, while in case of Kolkata and Chennai it was over Rs 40 a kg.
 
In comparison, on September 21, retail price in Delhi was around Rs 41 a kg, Rs 47 a kg in Mumbai, Rs 40 a kg in Kolkata, and Rs 30 a kg in Chennai. Though it might seem as though the bans did not have any impact, onion prices did stabilise in the wholesale markets in the first few days after the ban. However, the trend has reversed since September 21.
 
From September 15 to 21, there was a nominal Rs 3 per kg increase in the wholesale prices in Delhi, while in Mumbai prices rose by Rs 2 per kg. In Kolkata, there was no increase in the immediate week after the ban, and there was a nominal increase in Chennai.
 
“Yes, the drastic reduction in prices which was being anticipated because of the ban hasn’t happened, particularly in the retail markets, as traders haven’t passed the full benefit as they are first liquidating old stocks that have been purchased at high prices,” said a senior government official who regularly tracks the prices. He said another reason prices have taken time to soften is that the new onion crop being harvested in Maharashtra, Karnataka, and Andhra Pradesh is not of the desired quality because of renewed rains in these parts.
 
Traders are taking advantage of this and preventing prices to drop sharply in retail markets. “In some area, the rains are hampering harvesting of new onions, while in other places even if the crop has been harvested, its quality is very poor,” the official said.

 
He said the situation will return to normal in Delhi subject to weather conditions remaining benign in the coming days because Alwar (Rajasthan), which feeds around 25-30 per cent of the national capital’s demand, is estimated to see a bumper harvest and onions from the area will hit the market from late October.
 
Madan Sabnavis, Chief Econ­omist at CARE Ratings, said it was taking time for prices to reduce because there is a shortage in sup­ply due to rains damaging crops.
 
“Whenever there is short supply of onions, the government resorts to an export ban. This works. Even now, supply could have been further curtailed had there been no export ban and prices could have further increased. However, export policy should work with import augmentation,” Sabnavis said.
 
He said India usually delays importing onions and by the time it comes, supply situation gets corrected. He said it takes about three weeks to float tenders to import. “Then there is the logistics issue of transporting them to respective mandis. Export ban and import augmentation in fact should run simultaneously to ease pressure on price,” Sabnavis added.