Source, stock and transport: Centre's plan for private firms in onion logistics

Onion prices have posed a headache for governments over the years, with its volatile prices figuring in election campaigns. (PTI)
Onion prices have posed a headache for governments over the years, with its volatile prices figuring in election campaigns. (PTI)

Summary

  • Onion prices tend to rise during August and remain elevated through October and November, coinciding with the festive season. At this time, the government steps in to release stocks held by Nafed and NCCF.

New Delhi: Steep prices, rotting stocks and cartel concerns - The heartburn that comes with onion harvests every year may become a thing of the past, with the government looking to sign up private firms for efficient storage and transport of the kitchen staple to supplement its own buffer stocks.

Selected companies will source and store onions from hubs in Maharashtra, Karnataka and Madhya Pradesh at a pre-agreed price, to be delivered across the country when needed, a person aware of the plans said on the condition of anonymity.

India maintains buffer stocks to stabilize prices of onion, a kitchen bulb prone to volatile prices since a quarter of the produce is lost after harvest. Currently, the stocks are maintained at warehouses run by national agriculture cooperatives.

“The preparation of the terms and conditions for the tender document is nearing completion and will be released soon. Under the tender, the responsibility for the transportation and storage of onions will rest with the selected private entity. Any failure to fulfill these obligations will result in the forfeiture of their security deposit and blacklisting from future contracts," a second person aware of the plans said on the condition of anonymity.

Also read | Government to rope in Railways to rein in sky-high onion prices

Onion prices have posed a headache for governments over the years, with its volatile prices figuring in election campaigns. Prices tend to rise during August and remain elevated through October and November, coinciding with the festive season. To address this, the government begins selling onions at subsidized rates of ₹35 per kg from August or September. In 2023, the discounted onions were sold at ₹25/kg from August through stores and mobile vans operated by Nafed and NCCF.

Presently, the government’s buffer onion stock is managed by the National Cooperative Consumers' Federation of India Ltd (NCCF) and the National Agricultural Cooperative Marketing Federation of India Ltd (Nafed) for a fee paid by the consumer affairs ministry. Queries emailed to the consumer affairs ministry which plans to float the tender remained unanswered.

Vinod Anand, an agricultural policy expert and member of a government committee on minimum support prices, emphasized the urgent need for reforms in the onion supply chain to address persistent challenges like price volatility and farmer exploitation. "Aligning procurement with actual production is crucial to avoiding the price fluctuations that hurt both farmers and consumers," Anand said.

Also read | Centre keeps a wary eye on the sky as onion looms large over state polls

However, Anand opposed the government’s move to involve private players in procurement, stating they may have a larger interest in exploiting the market and disrupting prices. Traceability, enabled by the government's e-Samridhi logistics platform, could revolutionize the sector by ensuring transparency from production to sale, he said. Anand pointed to the influence of India's largest onion hub at Lasalgaon in Maharashtra, adding central cooperatives need to curb inefficiencies and unfair practices.

Maintaing supply

Apart from the stocks held by the private sector, the ministry will also maintain a secondary buffer stock to ensure market stability, the second person added. This reserve will be utilized to offset any price surges, providing an additional safeguard for consumers during periods of volatility.

The government has often ordered stock limits and export curbs to ensure ample supplies. Exports were banned from December 2023 to May 2024, followed by gradual liberalization and reduction in export duties. Consequently, monthly onion export volumes increased from 72,000 tonnes in September to 168,000 tonnes in December 2024, the ministry data showed.

Also read | Govt plans to introduce new agriculture export policy

“Transporting perishable commodities like onions across the country is a complex challenge due to their sensitive nature and risk of spoilage during transit. An integrated supply chain focused on maintaining ideal temperature conditions, proper packaging, and efficient handling is essential. With real-time temperature monitoring and advanced storage protocols, we can minimize losses, optimize transportation, and ensure that the quality of agri-commodities like onions is preserved throughout their journey," said Swarup Bose, founder and chief executive officer, Celcius Logistics.

The Centre is targeting to procure 475,000 tonnes of onions for the buffer stock in FY25, after production fell from 31.6 million tonnes in FY22 to 24.2 million tonnes in FY24. Meanwhile, annual household consumption of onions in FY23 stood at 19.3 million tonnes.

The government procured 470,000 tonnes of onions from the rabi harvest last year at an average price of ₹2,833 a quintal, sharply higher than the previous year’s ₹1,724. Buffer stocks were released to curb price surges, and export policies were calibrated to ensure domestic supply.

Catch all the Industry News, Banking News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
more

topics

MINT SPECIALS