Onion prices hit two-year highs on reduced supply

Unseasonal rainfalls in October damage crop in Karnataka and Maharashtra, delay new season harvests

Steady decline in last year's inventory has seen onion prices hitting two-year highs in wholesale mandis across major producing regions in Maharashtra. The price increase spilled over from Maharashtra to other regions across the country, prompting consumers to stay away from regular onion consumption.

Data compiled by Nashik-based National Horticulture Research and Development Foundation (NHRDF) showed the price of the vegetable at Rs 28.64 a kg in Asia's largest spot onion selling mandi in Lasalgaon on Monday, down marginally from Rs 29.54 a kg on November 2. This wholesale price was up by Rs 8.44 a kg or 42 per cent over the past one month. Two months ago, however, onion prices were hovering around 16.45 a kg, nearly half the current market price, in the benchmark Lasalgaon market. The price surge was almost similar to that in major mandis across Gujarat, Delhi and Rajasthan. The current price levels have not seen since October 2015.

Onion consumption fell gradually with the retail price hovering around Rs 60 a kg in Mumbai and Rs 50-55 a kg in Delhi. The sharp increase in prices is attributed to the delay in harvesting of the new season crop from Karnataka due to unseasonal rainfall in October.

"Normally, the early Karnataka crop starts hitting mandis in the second fortnight of October-early November. This year, however, early harvest got delayed due to late sowing of crop resulting into proportionate delay in its maturity. Thus, supply of new season crop is unlikely before early December. By then, consumers would have to bear with high onion prices," said Sanjay Sanap, a wholesale onion trader in Lasalgaon.

Interestingly, traders estimate only 40 per cent usual area sown under onion in Karnataka this year. This means, Karnataka onion crop was estimated to remain lower by 60 per cent this year. Over and above, the unseasonal rains not only lowered sowing area but also reduce potential of productivity due to high moisture in the field. Karnataka contributes nearly 15 per cent of the early supplied onion crop across the country which jacks up supply ahead of its harvesting in Maharashtra. In Maharashtra also, onion crop is delayed resulting into lower supply to mandis.

In Lasalgaon, for example, onion arrivals slumped to 800 tonnes on Monday compared to 2148 tonnes and 2684 tonnes one and two months ago respectively. In Pimpalgaon mandi also, onion arrivals have declined to 1500 tonnes today compared to 2400 tonnes a month ago. Stockists, it seems, have started diverting their consignment to Mumbai where arrivals boosted to 2142 tonnes on Monday from 1316 tonnes a month earlier.

"Onion traders are bringing in their trucks to Mumbai to take advantage of high prices. Even at this price, exporters find parity with onion prices hovering very high in competing countries like Pakistan. Since, Kuwait has banned its import from Egypt, orders in the entire Middle East are diverted towards India," said an onion exporter.

Meanwhile, India's onion exports have jumped by 56 per cent to 1.23 million tonnes worth Rs 1,443 crore for the four-month period of the current financial year compared to 788,257 tonnes (Rs 977.84 crore) in the corresponding period last year.