KNOW YOUR ONIONS
High onion prices have returned to haunt the government. In Mumbai, onions are currently retailing at Rs 120 a kilo, compared with the Rs 10-30 a kilo they were sold at as recently as August this year. The main reason for these eye-watering prices has been the unseasonal rainfall in Maharashtra, one of India’s major onion-producing states, along with Andhra Pradesh and Karnataka. India, one of the top three onion-producing countries in the world, produced 23.5 million tonnes of onions in 2018-19.
“This is becoming a frequent affair, with the prolonged monsoon damaging the crop and raising prices,” says Madan Sabnavis, chief economist with Care Ratings. Onion production takes place in three seasons in Maharashtra. The unseasonal rains destroyed the kharif crop, which was to be harvested in October-November. Rains have also hit the sowing of seeds for the next season, starting in December. Lasalgaon, a town in Nashik district, Maharashtra, is one of the major producers of onions.
Rajendra Shelke, president of the Onion-Potato Traders Association, says that as many as 90 trucks of onions arrive every day at the Agricultural Produce Market Committee in Vashi, Navi Mumbai, which supplies onions to Mumbai and neighbouring areas. There are two types of onions—fresh produce, coming directly from farms, and stored onions, which come from stockpiles. The former, used mostly by households, cost Rs 80-100 a kilo (wholesale), while the latter, used by hotels and restaurants, cost Rs 100-120 a kilo. “The flooding in Satara and Sangli in August is a major cause of the price hike, as it destroyed the crop,” says Shelke, adding that he expects prices for fresh produce
to rise to Rs 130 a kilo quite soon.
According to reports, in a bid to curb prices, the government is importing 11,000 tonnes of onions from Turkey, which are expected to arrive in India by end-December or early January. Previously agreed-upon imports from Egypt are expected to arrive in the second week of December. The government has also banned onion exports and imposed stock limits. But the actions have come a bit too late. “We don’t get into contracts to import onions well in time,” says Sabnavis, “so things get out of hand.” There is also a lot of profiteering in the marketplace—when customers pay Rs 120 per kg for onions, farmers may not be getting more than Rs 50-60.
“Onion imports do little to reduce prices,” says
Shelke, who believes that prices will return to normal only around March. Addressing shortages through imports is also a cumbersome process, because the government has to arrange for storage and transport of the arriving goods. It is not uncommon for onions to rot at ports before they can be picked up and delivered to markets.
High food prices have also stoked inflation— retail inflation rose to a 16-month high in October, driven by high prices of vegetables, pulses and meat. Pulses and vegetables have both been affected by the monsoon. Among vegetables, onions have registered the highest increase. Despite this, the RBI is still expected to lower key interest rates to support growth (it has lowered rates by 1.35 percentage points since February this year). ■