Remember the onion price shock last year? This time, the govt is acting early

Most of the onions sold across North India come from India's onion belt of Nashik, Pune and Ahmednagar. (Photo: Bloomberg)
Most of the onions sold across North India come from India's onion belt of Nashik, Pune and Ahmednagar. (Photo: Bloomberg)

Summary

  • Onion prices may rise further if supplies remain low, something the govt wants to avoid given that several assembly elections are due this year, especially since steep the prices have often influenced voting choices. Its options: Directing stock declarations and stock limits to raise supply.

New Delhi: The spectre of yet another onion crisis has prompted the Centre to consider stock limits and declarations, with last year's runaway prices still fresh in memory.

Despite a good harvest this year, fewer onion trucks are arriving daily at Delhi’s Azadpur mandi, India's largest vegetable wholesale market, sparking fears that prices could soar in the weeks and months ahead. Supplies from the onion hub of Nashik in Maharashtra have been lower than usual, an official who attended the discussions said, adding though the situation is not alarming yet, the government does not want to take chances.

"If this continues for some time, we may ask traders to declare their stocks, and if this fails, the next step will be imposition of stock limits," the official said on condition of anonymity. “The discussions are at a very early stage. We will take a call depending on the situation going forward."

Most of the onions sold across North India come from India's onion belt of Nashik, Pune and Ahmednagar. Prices may start to rise further if supplies remain low, something the government wants to avoid given that several assembly elections are due this year, especially since steep onion prices have often influenced voting choices. All-India average retail price of onion on Wednesday was 43.4 per kg, up 69.5% from a year ago, consumer affairs ministry data showed.

Read this: Incredible onions: Gamma rays to keep stocks strong and healthy in storage

Queries sent to the secretary and spokesperson of the consumer affairs department remained unanswered at press time.

The government had banned onion exports in December last year to ensure adequate supplies in the domestic market, following dry weather that hurt crop and tight global supplies. The ban was lifted in May, and exports were allowed with a minimum export price of $550 per tonne, and a 40% export duty.

Low supply 

An onion trader from the Azadpur market said that supplies have been low despite a good onion harvest this year, possibly because farmers are holding stocks in anticipation of higher prices during September-October as is the case every year.

“At present, daily onion arrivals in the entire National Capital Region are 100-125 trucks (one truck carries 25-30 tonnes), including 40-50 trucks in Delhi’s Azadpur mandi. Typically, at this time, onions mostly come from Maharashtra, and some come from Rajasthan and Madhya Pradesh, but now, arrivals are mostly from the latter. As many as 13-15 trucks are arriving at Azadpur against the usual 25-30 trucks. The rest are coming from Rajasthan and Madhya Pradesh," said Surinder Budhiraja, a core member at the Azadpur Fruit & Vegetable market and president of Azadpur Mandi Onion Traders Association.

Read this: India lifts ban on onion exports, imposes minimum export price

“The crop in Madhya Pradesh is 50% lower this year. Hence, prices have shot up, leading farmers of Maharashtra to sell their produce to local markets and sending some to southern states like Karnataka, Tamil Nadu and Telangana, as demand is higher there. Sending onion to Delhi costs farmers more as transportation, labour and handling charges are higher. Additionally, they are holding their stocks to draw more when prices go up during the festival season in September and October," Budhiraja said.

Last August saw steep prices of onion and various other fruits and vegetables, prompting the government to sell the kitchen staple to consumers through its retail outlets and mobile vans at a subsidized rate of 25 per kg from its buffer stock. Retail sales were rolled out in states and union territories where retail prices were above the all-India average, or had considerably risen in just a month. In October, prices shot up to 80 a kg.

Prices this year

This year, onion prices rose 30-50% two weeks from May-end to the beginning of June due to a drop in arrivals and increasing demand ahead of Eid-al-Adha, an Economic Times report said. Also, traders held stocks in anticipation of easing government interventions.

Currently, fair average quality onion (modal) is quoted at 3,050 per quintal at Nashik's Lasalgaon, 2,650- 2,700 in Ahmednagar and 2,500- 2,800 in Pune, while prices in key markets of Ujjain, Dewas and Indore in Madhya Pradesh and Sikar and Jodhpur of Rajasthan are 600-2,800, depending on the region and variety, agriculture ministry data showed.

Spot traders and farmers said that between 20 May and 15 June, wholesale onion prices were around 1,300-1,800 in Nashik.

Also read: Govt may provide DBT to onion farmers for procurement

Prices started rising after government agencies started buying onions aggressively in June. The government plans to buy about 500,000 tonnes of rabi onion this year directly from farmers to meet its buffer stock requirement. So far, it has procured 300,000 tonnes, according to trade estimates and the government official cited above. The National Agricultural Cooperative Marketing Federation (NAFED) and National Cooperative Consumers Federation (NCCF) purchase onions on the government's behalf.

“Prices of onion in Nashik are on the upward trend as NAFED and NCCF are purchasing it. These agencies are mainly buying from traders instead of farmers. Additionally, supply is lower right now compared to May end and June due to rain. Daily arrivals in the entire Nashik district are about 2,000 tonnes against 5,000-6,000 tonnes during May end and June. This does not mean crop is less this year. Some crop was destroyed due to sweltering heat in May, but it does not have a substantial impact on the overall output," said Sunil Nirgude, an onion grower based in Nashik district.

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