Onions Again

Heaps of onions are reportedly lying unsold in the state, with buyers unwilling to pay even Rs 2 a kg for the perishable bulbs.

The root cause of the unending fluctuation in onion prices lies not so much in unsteady production as in an unstable trade policy regime. The after-shocks of the 1998 price spiral that had significantly influenced elections results in several states, including Delhi, have still not disappeared. Official approach towards the management of onion supply and prices continues to be characterised by panic reaction to emerging situations. Consequently, neither scarcity nor plenty can be tackled effectively.

India has been exporting onions for nearly a quarter century. Onions lead the list of fresh vegetable exports. Still, there is no long-term policy in this regard. Exports are banned sometimes for very trivial reasons. The worst part of this on-again-off-again policy is its short term perspective, keeping importers and exporters guessing all the time. Such uncertainties merely add to the demand-supply imbalance that plagues the domestic market. The quantities and types of bulbs to be exported are mostly decided keeping in mind the domestic situation. Thus the requirements of importers and international market conditions are ignored.

 

Onion is a short-duration crop that can be grown at different periods in different parts of the country. It is, therefore, quite easy for the domestic output to catch up with any sudden fluctuation in demand provided there is an overall steady policy regime. It is the policy uncertainties that exacerbate the demand-supply mismatches. This is precisely what happened after the 1998 onion crisis. Responding to good prices, growers raised output much higher than could be locally absorbed. In the current year too onion output is officially projected at 4.75 million tonnes, against the estimated consumption of 3.9 million tonnes. Actual production may turn out to be even higher. Still, the government has chosen to keep exports on a tight leash.

First, it allowed only a limited quantity of two lakh tonnes to be exported between December and March by three agencies, Nafed and the state marketing federations of Maharashtra and Karnataka. When this arrangement failed to show any results and reports of distress sales started pouring in, the government allowed free export but only of Bangalore Rose and Krishnapatanam onions. Going by its track record, the government may now permit export of Tamil Nadu onions as well.

But such piecemeal action will only perpetuate the vicious circle. What is needed is to put onion export and import on OGL with suitable tariffs which can be modified occasionally in response to the domestic price and availability scenario. Market forces should be allowed to take care of domestic shortfall or surplus through the trade route.