Govt sets 72% cost recovery rate for onion procurement; pvt firms’ participation to check rotting stocks, steep price

This recovery rate is 7 percentage points higher than last year’s 65% for rabi onion.

Cost recovery is the quantity of good-quality onions that remain fit for sale after storage and handling. A 72% rate means that out of every 100 kg of onions procured, 72 kg must remain marketable after accounting for losses due to rotting, sprouting, or shrinkage during storage.

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Traders often cite allegedly poor quality of onions, which is a highly perishable vegetable, in order to try and hike prices. The new cost recovery rate addresses that issue.  

Buffer stock strategy

The provision is part of a broader procurement contract that also includes staggered payments to private firms under the procurement drive, which aims to build a buffer of about 500,000 tonnes of onions.

The Centre set to release a list of the private procurers soon.

This is part of the Centre’s buffer stocking strategy, implemented through agencies like the National Agricultural Cooperative Marketing Federation (NAFED) and National Cooperative Consumers' Federation (NCCF), to stabilize retail prices and prevent sudden spikes.

“The cost recovery rate of 72% has been finalized by the top level, and it will be effective in this procurement year," said the first of the two people mentioned above.

"A higher recovery rate translates into better availability of onions during times of crisis, enabling more effective market intervention and helping control prices when they escalate. It also reflects more efficient operations and lower procurement costs for the government," the person said.

"Better cost recovery also sends a strong message to traders, discouraging them from attempting to exploit the market and make excessive profits during times of crisis."

This time, the government has included incidental expenses for private players who will be selected for the procurement and storage of onions, aiming to make the system more efficient and transparent.

“They have been asked to quote a rate that covers the cost of lifting the crop from the field to the storage point, up to the stage where the commodity is loaded for transportation to the point of sale during a crisis—typically around August and September, when prices tend to spike," said the second person.

“It will also be finalized soon, and procurement will start in the next few days," the person added.

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This rate will include transportation from farm to storage, unloading, handling, labour charges, and final loading for dispatch—essentially ensuring that the onions are properly managed and made ready for the market or further distribution.

However, farmers believe that a higher recovery rate will have little bearing on them directly.

“It won’t affect us. Whether the recovery rate is 65% or 72%, it’s the private players and Farmer Producer Organizations (FPOs) handling procurement who will have to manage that risk. Farmers continue to receive prices based on the quality of their produce," said Bajirao Gagare, an onion farmer from Ahmednagar district in Maharashtra.

As of now, Grade-1 onions are being sold at ₹2,000 per quintal, while onions of slightly lower quality are fetching between ₹1,500 and ₹1,800 per quintal in local mandis, said Gagare, who runs ‘Hi Maitri Vicharanchi’, a farmers’ group on social media.

Onion prices play a key role in retail inflation, and with their prices currently under control, inflation eased to a nearly six-year low of 3.16% in April—due also to subdued prices of vegetables, fruits, pulses, and other protein-rich items. The Consumer Price Index (CPI)-based inflation was 3.34% in March and 4.83% in April 2024. The last time it was this low was in July 2019, at 3.15%.

Data from the National Statistics Office (NSO) showed a sharp decline of 91 basis points in food inflation in April 2025 compared to March 2025. The food inflation in April 2025 was the lowest since October 2021. One basis point is a hundredth of a percentage point.

Food inflation in April was 1.78%, lower than 2.69% in the preceding month and 8.7% in the year-ago month, the NSO data showed.

Queries emailed to the consumer affairs ministry remained unanswered till press time.

Data from the consumer affairs ministry showed that as of 7 June, the average retail price of onions was ₹26.17 per kg, much lower than ₹32.93 per kg recorded a year ago. Retail onion prices in Delhi were at ₹28 per kg on 7 June, compared with ₹35 per kg a year ago. In Mumbai, prices have decreased by 30.4%, reaching ₹32 per kg from ₹46 per kg, while in Chennai, prices declined by 25%, from ₹40 per kg in 2024 to ₹30 per kg on 7 June.

Onion are harvested in three seasons—rabi (March–May), kharif (September–November), and late kharif (January–February).

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Major onion-producing states are Maharashtra, Karnataka, Madhya Pradesh, Gujarat, Bihar, Andhra Pradesh, and Rajasthan. The key onion-growing districts in Maharashtra are Satara, Nashik, Jalgaon, Pune, Solapur, and Ahmednagar, which account for about 94.68% of the state's total area under onion cultivation. Major onion-growing regions in Karnataka include Belgaum, Bijapur, Bagalkot, Gulbarga, Dharwad, and Bidar.

Last year, the price of this essential food item began rising after the government’s decision to scrap the minimum export price (MEP) of $550 per metric tonne on 13 September 2024 and halve the 40% export duty imposed on onion shipments.