Decoding the onion price rise
India needs a robust annual agricultural outlook
Wild swings in onion prices have now become fairly entrenched. Every alternate year, there is at least one price spiral. Given their political significance, onion prices are emblematic of India’s larger food inflation battle. There are several reasons why vegetables generally become expensive during the June-september period. Rainy spells hamper freight movement across the country, dwindling supplies. Droughts, on the other hand, can trim output. Extreme weather events always come in the way of efficient agriculture and the markets. Malpractices add to the problem. In December 2010, when prices peaked during the last major instance of a spiral, a Competition Commission of India (CCI) probe revealed that one firm alone accounted for nearly one-fifth of the total trading that month.
This year’s crisis is rooted in a supply crunch, triggered by, first, a sluggish start to the monsoon, and, then, delayed harvests due to untimely rains. Flooding has ruined about a third of the crop in Maharashtra, India’s largest onion-growing state. The next harvest will hit markets only from January. Till then, prices will remain under pressure.
The problem needs a multi-dimensional fix. India lacks a robust yearly agricultural outlook, which refers to a tightly scanned, market intelligence-based forecast of availability and prices. Without it, there is little by way of advance warning. It’s strange that even government policymakers look up to the United States’ department of agriculture’s annual India projections for a reliable food supply outlook. Investment in cold chains and adequate food-processing facilities can help tide over crises with dehydrated onions. Price stabilisation requires a fine-tuned policy whereby the government efficiently buys excess stocks during winter harvest and releases them during summer shortages, but well before monsoon begins. The government should efficiently and effectively intervene in private markets to curb price volatility.