Companies & Sectors
Onion prices continue to crash due to excess supply

In just two months, the prices of onion tumbled by 52% due to excess supply and low off take

The prices of onion have crashed by more 52% in the past two months due to excess supply across the country. Experts say that though the prices are in the favour of consumers, the government interventions in required as farmers are unable to recover their cost of production.
 
In the key onion market of Laslangaon in Maharashtra prices have been falling since early December. The wholesale price for onion is Rs350-Rs400 per quintal compared with Rs850-Rs900 per quintal two months ago.
 
According to RP Gupta, director, National Horticultural Research and Development Foundation (NHRDF), “This is something we had predicted. The prices were bound to fall from January as there was excess supply. The government gave a production estimate of about 80,000-90,000 metric tonnes for onions. However, the total production during this season is much higher.”
 
The official data released on last week stated that onion prices fell steeply by 79.1% from same period last year. According to Horticulture division of Agricultural Ministry, the total production of onion for 2011-12 for all three season- rabi, kharif and later kharif – stood at 1.51 lakh metric tonne.
 
According to a Lasalgoan-based trader, there are simply no takers for the produce. “The government policy for onion has always been wrong. Now at least it should intervene and give some subsidy to exporters. Otherwise the situation will continue to remain same.”

Last month, following the protest from traders, the government slashed the minimum export price (MEP) for onions from $250 to $150 per tonne. Maharashtra state government also issued no objection certificate for the export of 3,000 tonne.

In the Mumbai market similar trend is followed. In APMC, Vashi the wholesale prices are as low Rs4-Rs5 per Kg.  Similarly, the prices are also falling in Andhra Pradesh. In Vijaywada, due to lower demand and extra supply from the other southern states, the prices of onion have crashed as low as to Rs2-Rs3 per Kg.

Mr Gupta says that, “There is an urgent need of government intervention. Onion growers cannot even recover the cost of the production and are compelled to sell at low price, incurring losses.” 

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No weekly food inflation data from today

The government on Thursday announced discontinuation of the release of weekly primary and food inflation data based on the Wholesale Price Index

New Delhi: The government has discontinued practice of releasing food inflation data every Thursday from today reports PTI

"Consequent upon the decision of the Cabinet Committee on Economic Affairs (CCEA) held on January 24, 2012, weekly release of Wholesale Price Index (WPI) for the commodities/ items under the Groups 'Primary Articles' and 'Fuel & Power is discontinued with immediate effect," the Ministry of Commerce and Industry, which releases the inflation data, said

The government, however, will continue releasing the monthly headline or overall inflation data, which also contains the break-up for all segments including food, non-food, fuel and manufactured items. The monthly WPI for January would be released on February 14.

The Ministry of Commerce and Industry used to release the Wholesale Price Index (WPI) data on primary articles and fuel and power every week, mostly on Thursdays. The primary articles include food items, which has a weight of about 14 per cent in the overall inflation.

Food inflation stood at (-) 1.03 for the week ended January 14, according to the data released last week. Headline for December was 7.47 per cent.

"It is a sensible decision to do away with weekly data release. Not only are the weekly-on-week data more volatile but they are also not a good indicator of the real price situation," Crisil Chief Economist D K Joshi said.

He also said that globally the practice is to release inflation data on a monthly basis.

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SBI may cut interest rates to boost credit: Bank official

Without indicating the timeline for the rate cut, CFO Diwakar Gupta said, the bank would take a call on the issue after taking into account the "spreads and profitability."

The country's largest lender, State Bank of India (SBI), is "keen" to cut interest rates in order to boost credit expansion, a top bank official said.

"All sentiment is building towards it (an interest rate cut)...we are keen to do it," the bank's chief financial officer (CFO) Diwakar Gupta told reporters on the sidelines of an International Research Conference organised by the RBI.

Without indicating the timeline for the rate cut, he said, the bank would take a call on the issue after taking into account the "spreads and profitability."

The Reserve Bank of India last month reduced the Cash Reserve Ratio (CRR), the portion of deposits that banks are required to keep with the central bank, from 6% to 5.5% releasing Rs32,000 crore of primary liquidity into the system. As regards SBI, the CRR cut would unlock Rs5,000 crore for the lender. Although the RBI did not cut its lending rates, the CRR reduction had raised hope of interest rate cut by the lenders.

According to Gupta, a rate cut can happen even before the reduction of repo (short-term lending rate) by the RBI.

With the CRR cut, the bank stands to earn up to Rs500 crore over the year, he said, adding it enhances "the ability (of SBI) to pass on the relief when the conditions warrant".

The Government too has recently approved Rs7,900 crore of fund infusion into the bank to help it expand business without sacrificing the capital adequacy norms. SBI, according to estimates, would need additional capital of around Rs16,000 crore next year. The bank's lending book expands by around Rs1,50,000 crore every year and going by that figure it will require Rs15,000 crore to Rs16,000 crore in capital next year, Gupta explained.

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