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Onion price moves up on reduced supply, rising demand

Nafed, SFAC also begin to build buffer stocks under govt's Price Stabilisation Fund, for release in the market if price flares later

Dilip Kumar Jha  |  Mumbai 

Onion prices have begun rising again in wholesale on reduced supply, as large farmers and stockists release in controlled quantities, expecting a further price rise during the lean season of August and September.

During this two-month period, onion prices have surged in the past, to a lifetime high of Rs 100 a kg in the retail market in October 2013. While experts do not expect a repetition, they believe the price would remain elevated.

Data from the Union agriculture ministry showed an onion price rise of 13 per cent last week, before softening to settle at Rs 1,550 a quintal in the benchmark Lasalgaon market on Thursday; it was quoted at Rs 1,100 a qtl there in May. In Mumbai, the price was Rs 2,300 a qtl on Thursday, a rise of 21 per cent from Rs 1,900 a qtl on June 1.

“Onion prices move slightly up during June as stockists supply stored quantity from warehouses. This year, however, the price is elevated because of report of crop damage on unseasonal rain in February–March. But, the price is unlikely to rise abnormally this year, due to commencement of new season sowing,” said R P Gupta, Director, National Horticulture Research & Development Foundation.

With intermittent rain has begun, so has nursery sowing of seed. Onion sowing does not require too much of rain.

Another reason for the recent price increase is the mandate, for the first time, given by the Union ministry of finance to the Small Farmers Agriculture Consortium (SFAC) and National Agricultural Cooperative Marketing Federation of India Ltd (Nafed) to build a buffer stock. Under the Price Stabilisation Fund announced in the earlier Union Budget, both are to procure onions from the open market.

“We have procured 2,200 tonnes so far from in Nashik and Indore districts, with a target to procure this year at 10,000 tonnes. The procurement is done in mandis through the price discovery mechanism in absence of a minimum support price,” said Pravesh Sharma, managing director, SFAC. It is storing onion in hired godowns.

Nafed is concentrating on Nashik district for procurement of onion, from the Lasalgaon and Pimpalgaon “We have procured 1,700 tonnes so far. Our target is 2,500 tonnes this year for Delhi-centric release, as per direction from the Delhi government. We have our own storage facility,” said S K Verma, general manager, Nafed.

Apart from domestic stock building, rising export orders and falling arrivals have also helped the price to rise. In Lasalgaon, for example, daily arrival has fallen to 1,400 tonnes now from a little over 1,600 tonnes earlier. During the peak harvesting season, arrivals hit 2,282 tonnes on May 19.

The National Horticulture Board estimates output at 19.4 million tonnes in 2014-15, similar to last year. However, traders estimate crop damage of 15-20 per cent due to unseasonal rain early this year.

“Farmers anticipated onion price to go up due to crop damage. Therefore, they are releasing in controlled quantity,” said Atul Shah, director at the Pimpalgaon wholesale market.

First Published: Thu, June 11 2015. 22:35 IST