The huge variation in the wholesale market and end-user price of onions is due to hoarding and involvement of multiple intermediaries who make a fast buck in each transaction. The poor farmer gets next to nothing for his toil
It is an annual feature in our country, when the aam aadmi cries foul over expensive onions in the market. The prices of popular and essential items in the kitchen, like potatoes or onions, keep rising and after a hue and cry, the government either stops exports or fixes a higher export floor price, or as a last resort, arranges for token imports from China and Pakistan to quell the demand. Of course, they do issue a strict warning or two to hoarders, that serious action will be taken against them. This is followed by a small fall in prices and everyone moves on to some other issue, forgetting the onion misery.
Indian production of onions has hovered around 18 million tonnes annually, and usually about 10% of this is exported, mostly to gulf countries where millions of expatriate Indians live and work.
Lasalgaon is Asia's largest onion market where the price of onion recently increased to Rs1,360 per quintal (100 kg), but the market retail price in India at various outlets reached a staggering rate of Rs25 to Rs30 per kilo. Why should this be so?
This huge spread in the wholesale market price is due to hoarding and involvement of multiple intermediaries who make a fast buck in each transaction. The poor farmer gets next to nothing for his toil.
It is time that Agriculture Minister Radha Mohan Singh pays special attention to increasing the production of essentials like onions, potatoes etc in the country, by expanding the area of cultivation and an effort towards getting better yields per acre. It has been reported in the press that while India gets around 15 tonnes per hectare, against the global average of 19 tonnes, there are hybrid varieties that yield as much as 50 tonnes in Korea. This means we need to obtain better and high quality seeds to secure best results on each acre.
Onion seed prices, in the recent past, have also gone up in the market from Rs400 a kilo to Rs3,000 per kilo as reported in the press. It is therefore imperative that NAFED (National Cooperative Agricultural Marketing Federation) and National Horticultural Research and Development Foundation (NHRDF) take extra pains to maintain and distribute quality onion seeds to the farmer at competitive prices. In fact, they should supply high quality seeds at competitive prices for all the items under their purview.
It is now obvious that due to lack of strict watch and control, onion seed prices have shot up to Rs3,000 per kilo against the normal rate of Rs400 per kilo. This kind of racketeering must be stopped at all costs.
The supply situation in the market is getting worse by the day. Sellers of these items themselves are recommending the aam aadmi to buy and stock more because they anticipate that the rate would rise further, and onions may be priced at Rs70 to 80 per kilo by the time the new Rabi crop comes in, around September this year.
Indian onions are popular in the lower gulf countries where millions of Indians and other Asians live. The main exporters to this region in the past have been only India and Pakistan. But when a similar situation was developing, China, USA and Australia also started making inroads into the large Dubai market. Hundreds of trucks carry these back to other neighbouring countries such as Saudi Arabia, Sultanate of Oman, Qatar and Bahrain. Small Dhows that ply in the Arabian gulf waters (Persian Gulf) also carry the produce to several countries in the region. This entrepot trade is in addition to direct imports by all these countries.
Meanwhile, the Government announced a minimum export price (floor price) of $300 per tonne, which works out to Rs18 per kg, to which other charges of shipping, handling and distribution will be added when it lands in Dubai or any other port. Even then, it will be slightly cheaper or at par with Indian prices, as current in the domestic market! Both Pakistan and China also supply around this price level, though the US and Australian varieties are more expensive and preferred by western expatriates.
It has been reported in the press that the Agriculture Ministry has claimed that horticulture crops expect to have a record output this year - which includes both onions and potatoes - but such news has no bearing on the aam aadmi if he cannot get supplies at lower rates than they are today.
The government must truly crackdown on hoarders and ensure that the situation is brought back to normalcy before it deteriorates further. Failure to control this price rise and inability to increase supplies would be the first major test for the new government.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)