According to Ministry of Consumer Affairs, stored onion is not being released in to the markets and either farmers or traders are making undue profit by creating artificial scarcity

Onion prices touched Rs80 per kg in most retail markets on Wednesday despite normal supply in the wholesale markets. Food Minister KV Thomas assured state governments that the union government would find a solution to contain prices. Thomas said he was in touch with Sheila Dikshit, the Chief Minister of Delhi and authorities in other states to find an immediate solution to the crisis.

When asked about the sky rocketing prices of onion, the minister said, “I am in touch with states such as Delhi whether they are able to take onions from Nasik. (Agriculture Minister) Sharad Pawar will be coming on Sunday. So I will find some solution for it”.

Heavy rains in Maharashtra, the largest producer of onion and the Andhra Pradesh have caused extensive damage to crops that has led to its short supply in the market.

According to RP Gupta, director of National Horticultural Research and Development Foundation (NHRDF), prices of onions rose slightly to Rs46 per kg today from Rs45 a kg at Lasalgaon in Nashik, even as supplies remained normal.

He said, prices are expected to cool down in the first week of September once onion supplies from Andhra Pradesh and Karnataka increases, he added.

According to an internal note prepared by the Ministry of Consumer Affairs there was only 5% lower production of onion during 2012-13 as compared to 2011-2012 and storage was less by only 2 lakh tonnes. "But there was a sharp decline of market arrivals by around 20% to 40% during June-July 2013 as compared to 2012. It seems that the stored onion was not released to the market timely and either farmers or traders are making undue profit by creating artificial scarcity. Accordingly, prices increased almost double the level as compared to 2011-2012," the note says.

During 2012-13, the area under onion cultivation is 0.99 lakh hectares compared with 1.08 lakh hectares during 2011-12, a decline 8.33%. The figures given out in the note mention that the production of onion was 166.55 lakh tonnes during 2012-13 as compared to 175.11 lakh tonnes during 2011-12, which means that the production in 2012-13 is less than 4.89% in 2011-12.

When it comes to storage, 2012-13 saw 2 lakh tonnes less compared to 29.50 lakh tonnes in 2011-12. While, the area under onion cultivation, the production and storage have all declined marginally, the export of onions for the year 2012-13 is 5.70 lakh tonnes more compared to 2011-2012, the note said.

Onion supply to Delhi, which comes from Maharashtra, Rajasthan and Madhya Pradesh, is normal at 12,000 quintals in Azadpur, Asia’s largest wholesale market, said Onion Merchant Traders Association.

The merchants attributed the rise in wholesale price of onion in Delhi to increase in prices of the bulb crop in Maharashtra, the country’s largest onion producing state.