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Photo: Reuters
Photo: Reuters

As prices begin to bite, govt moves to tame the onion

Mint looks at the reasons behind onion price rise and the way out of the price fluctuations

Retail prices of onions, a staple in Indian kitchens, have doubled since July, pushing the Centre to take measures to reduce prices ahead of assembly polls in Maharashtra and Haryana. Mint looks at the reasons behind the price rise and the way out of the price fluctuations.

Why are prices of onions so high?

Prices of onions have soared from 25 a kg in June-end to 40 a month ago and 60 now due to deficient rainfall, which led to a reduced winter crop harvested during March-May. The other reasons are disruptions in supply following excess rain in the major onion growing regions of Maharashtra, Madhya Pradesh and northern Karnataka, and damage to the kharif crop planted in July-August. This led crop arrivals at wholesale markets in September to fall to 3.5 million quintals this year from 6 million quintals in 2018, shows data from National Horticultural Research and Development Foundation.

What is the Centre doing to tame prices?

The government withdrew export incentives in June and imposed a minimum export price this month. It has asked states to utilize the 35,000-tonne buffer stock for direct retail sales. The central agency in charge of the buffer stock is distributing onions in Delhi through Safal, an organized network for retailing fruit and vegetables, and stores of Mother Dairy that manufactures, markets and sells fresh fruit and vegetables and frozen vegetables. These outlets sell the produce at 24 a kg. The consumer affairs ministry said it might impose stock limits if prices do not moderate. The Centre also plans to import onions.

Are farmers benefiting from the rise in prices?

A handful of farmers who had stored their rabi harvest has benefited from the price rise. Most growers sold their crop to traders by July, when wholesale prices were 1,300 a quintal, as per farmers’ unions in Nashik. Those who sold earlier got a lower price: 900-1,100 a quintal. Prices crossed 2,600 in this month, but the stock is mostly with traders.

Paras Jain/Mint
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Paras Jain/Mint

By when are prices likely to come down?

Prices of onions are likely to come down as the harvest for kharif crops begins in October. However, a lot will depend on the size of the crop as excess rains may have damaged some of it in states such as Maharashtra and Madhya Pradesh. The late kharif crop, which is to be planted in October, is usually harvested from the end of December. This is a long wait. In the interim, retail prices of onions will depend on the action the government takes against traders and the quantum it imports to bridge the shortfall in supplies.

Is there a way out of the price fluctuations?

Price fluctuations are recurrent in major horticulture crops such as onions, potatoes and tomatoes, for both farmers and consumers. The way out is improved access to storage and higher processing. Access to storage will help farmers better time the markets and cut down on storage losses, while processing can ease their pain when wholesale prices crash and they are forced to dump their produce. Consumers will also benefit if products such as pureed tomatoes and processed onions are used widely.

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