Skyrocketing onion prices add to government’s troubles

Skyrocketing onion prices add to government’s troubles

New Delhi: Skyrocketing onion prices are adding to the woes of the government, which is already fighting corruption allegations and food inflation that’s still stubbornly close to double digits.

Exports have been banned and the government has ordered immediate emergency imports of the vegetable from neighbouring Pakistan to cope with the shortage and bring down prices, which have more than doubled. The vegetable has become costlier owing to the delayed arrival of fresh produce because of unseasonal rains in late November.

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Food price inflation has dropped over the past three months, but the United Progressive Alliance government at the Centre is still concerned over the 9.5% it’s at ahead of state elections in Assam, Kerala, Tamil Nadu and West Bengal.

Sensing its political impact—the failure to control onion prices was seen as one of the reasons behind the Bharatiya Janata Party’s (BJP) defeat in the 1998 assembly elections in Delhi and three polls after that—the government is seeking to improve supply.

Prime Minister Manmohan Singh expressed deep concern over the “extraordinary price rise" and said effective steps should be taken to bring it down, in a letter to the secretaries of the departments of consumer affairs and agriculture.

Agriculture minister Sharad Pawar told reporters that the situation would be back to normal in two-three weeks. “Onion prices rose because of rains in Nashik (in Maharashtra) and other onion-growing areas," he said.

While finance minister Pranab Mukherjee said all appropriate steps have been taken, commerce and industry minister Anand Sharma attributed the high prices to hoarding, which the Congress party has said should be checked by state governments.

The opposition, invigorated by the attacks against the government over graft and a landslide electoral victory in Bihar, sharpened its offensive on Tuesday. Karnataka chief minister B.S. Yeddyurappa blamed the central government’s policy decisions on imports and exports for the price rise.

Communist Party of India national secretary D. Raja pointed out that all food items have become costlier as has fuel in recent months.

Experts said the unexpected rainfall has led to the price rise.

“Everybody was expecting a good crop. However, the unseasonal rainfall in November-end in Maharashtra and other onion-growing states has delayed the arrival of onions in the market. Usually, the fresh onion crop begins to arrive in December. Onion prices are expected to come down significantly once the fresh arrivals start in January," said Abhijit Sen, an agricultural economist and a member of the Planning Commission.

Maharashtra and Karnataka produce 45% of India’s onions.

The agriculture ministry on Monday banned exports until 15 January, and will import onions from neighbouring Pakistan, as retail prices rose to 80 per kg from 35 last week.

Bijender Singh, chairman, National Agricultural Cooperative Marketing Federation Of India Ltd, said prices have started to come down after the government increased the minimum export price of onion to $1,200 (Rs 54,360) per tonne from $525 on Monday.

The department of consumer affairs said prices in the Nashik and Azadpur (Delhi) wholesale markets declined 35% and 13%, respectively, on Tuesday, following the decision to ban exports and increase the minimum export price.

Mint’s Jacob Koshy and Padmaparna Ghosh, Reuters and PTI contributed to this story.

Graphic by Yogesh Kumar/Mint.