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Supply crunch fuels onion price rise

The Tuesday's price indicates an increase of 123 per cent so far this month

Dilip Kumar Jha  |  Mumbai 

Wholesale onion prices rose to Rs 2,800 a quintal in the benchmark Pimpalgaon, Maharashtra, on Tuesday, on sharp decline in supply, as stockists held on to their inventory amid expectations of further rise in future. The Tuesday's price indicates an increase of 123 per cent so far this month.

"Onion price hit Rs 2,800 a quintal in late Tuesday auction in the Pimpalgaon mandi. Large stockists are releasing onion in controlled quantity, as they expect its price to go up. The major reason for the shortage is the damage of rabi crop last season due to unseasonal rains in March-April. Also, replanting of kharif crop is likely to get delayed due to deficiency of rains in July," said Atul Shah, director, Agricultural Produce Marketing Committee, Pimpalgaon.

Experts say the price would soften after kharif crop hits the market, three months later.

Despite a slew of measures by the government to curb onion price rise, circumstances beyond its control, including crop damage due to unseasonal rains and three weeks of dry spell, feared lower acreage and delay in kharif crop arrivals this season, led to spiralling of prices. To avoid a repeat of 2013, when the price touched Rs 100 a kg in the retail market, the government extended the ban on its hoarding till 2016, the minimum export price (MEP) was raised to $425 a tonne from $250 a tonne, to discourage exports.

As a result, onion export order dried up. Orders from overseas were diverted to Pakistan, Iran and China, where prices are cheaper by $100 a tonne than the prevailing prices in India. "India has gone out of export market due to high prices," said a city-based exporter.

Finance Minister Arun Jaitley had allocated Rs 500 crore for the Price Stabilisation Fund in the last Budget. This enables agencies such as Small Farmers' Agribusiness Consortium and National Agricultural Cooperative Marketing Federation to build buffer stocks of 10,000 tonnes and 2,500 tonnes, respectively. "Against India's production and consumption of around 19 million tonnes, 12,500 tonnes procured by the two agencies is negligible. Even if the government releases this quantity in full at one go, preventing prices from rising is impossible," said a Nashik-based trader.

R P Gupta, director, NHRDF, said the current price hike was the result of continuous rain in the last two days in storage regions, where stockists could not release sufficient quantity into mandis. "Let's wait for one or two days. Sowing of kharif onion seed is currently going on. So, it is premature to forecast the impact of deficient rainfall," said Gupta. In Lasalgaon, however, total arrivals slumped to 620 tonnes on Tuesday as against 1,400 tonnes on July 1. Similar trend was seen in the Pimpalgaon mandi also. Total arrivals fell to 750 tonnes in Pimpalgaon on Tuesday from 1,220 tonnes early this month.

First Published: Tue, July 21 2015. 22:33 IST