Most important point, in the whole onion episode, is the way every authority is overlooking hoarding and supply controls by wholesalers and middlemen to secure high prices
The common man's luxury of onion consumption was covered in Moneylife issues recently. In spite of repeated assurances by the government, the aam aadmi continues to shed tears for the non-supply and the galloping prices of onions, if he can lay his hands on them. In fact, the price has sky-rocketed close to Rs90 a kilogram in some places and it may hit the Rs100 mark soon, before the festive season.
What has the government done so far to alleviate this basic requirement and grievance of the aam aadmi except for "promises" and "assurances" in ‘kilograms’, free of cost?
In the meantime, potatoes and tomatoes too have joined the onion bandwagon, and the prices of these have gone up between 25% and 40% in most cities.
Before the onset of cyclone Phailin hitting the Odisha and Andhra coasts, the price (of onions) had more or less stabilised and was hovering around Rs50 per kilogram. Now, after the cyclone hit these two states, trade sources claim that both harvesting and transportation have become difficult!
It may be recalled that when the onion crisis was in the embryo stage, the government had announced that the import of onions had been approved and shipments were expected from China and Pakistan. Egypt was the third source of supply.
It was also projected that onions from Karnataka would be hitting the market by the middle of September. True, the situation in Karantaka is better than before. But details are not available of the quantity of onions actually received from China and Pakistan, if any, and at what cost?
In any case, it appears to have made no difference to the market, as the demand remains high. On the top of this, according to Rajinder Sharma, chairman of Azadpur Mandi, in Delhi, the buyers have found imported onions to be less "tasty" compared to their counterparts from India!
In the meantime, protests have also been made as to why India should export onions without meeting its home demand first. The Gulf countries have been our traditional markets for a number of products and agricultural supplies are a regular feature for decades now. Just because we have failed to control the nefarious activities of middlemen and hoarders, we cannot afford to stop shipments to places like Dubai. We need to accept the fact that these are also staple items for consumption for fellow Indians, who are toiling in the desert sun!
We must also remember that both India and Pakistan were the main suppliers of onions to the Gulf countries. Because of our fluctuating policies, many other suppliers have come into the market. In the recent report that Moneylife carried on the onion situation in Dubai, we had mentioned the price factors. Now, we have additional information that Australia (Dh4.95 per kilogram) and USA Dh6.95 per kilogram) have started supplying "brown" onions to Dubai. At the current exchange rate of Dh1 = Rs17.50 these are not cheap, but, by and large, are consumed by expatriates from these countries.
Reverting to the Indian situation, it may be noted that NAFED (National Agricultural Cooperative Marketing Federation, Nashik) has been the apex body for onion exports. Now, the government proposes to entrust them with the task of importing additional quantity of onions from Turkey, Afghanistan and Egypt, besides China and Pakistan, to overcome the current impasse. Why didn’t they think of this earlier so as to not let the matter precipitate to this level? The imported onion is estimated to be priced around Rs40-45 per kilogram, an acceptable price situation, though, at the peak season, indigenous supplies would be costing anything between Rs10 and Rs15 per kilogram.
On this issue, there is really no use taking it up with Sharad Pawar. He did not bother to frame a workable solution with regard to rotting foodgrains in the FCI (Food Corporation of India) godowns. Nor, did he support the idea of distributing the same to the poorer section of the community, free of cost!
KV Thomas, on the other hand, has recently come up with the idea of setting up smaller
versions of godowns in various places, which will be able to reduce the storage problem, and possibly, reduce the control that some cold storages have in hoarding these onions!
But the most important point, in the whole exercise, is the way every one in authority is overlooking the hoarding and supply controls by wholesalers and middlemen to secure high prices. It is time the government wakes up from its deep slumber and breaks up this mafia, which appears to be well entrenched.
(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.)
Inside story of the National Stock Exchange’s amazing success, leading to hubris, regulatory capture and algo scam