Image Courtesy: economictimes
Onion prices that have crossed the century mark in most states of India, have left consumers, retailers and wholesalers teary eyed. There has been a lot of noise over the bulbous crop especially after Finance Minister was pulled up for being casteist after she said that the price rise didn’t personally affect her a lot as she belonged to a family that rarely consumed onions or garlic. Subsequently, the hashtag #SayItLikeNirmalaTai started trending on Twitter, with people questioning that if the Finance Minister didn’t care for onions, did it mean that the whole country shouldn’t?
Onions have always been a politically sensitive crop prone to cause furore in India. With prices increasing month on month, Union Minister for Food and Civil Supplies Ram Vilas Paswan has directed the Metals and Minerals Trading Corporation (MMTC) to import onions from Turkey, Egypt and Afghanistan to meet the demand for the staple vegetable.
The Hindu reports that the MMTC has placed an import order of 4,000 tonnes from Turkey, the shipments for which are expected to reach by mid-January. This is in addition to the 11,000 tonnes from Turkey already contracted, along with 6,090 tonnes coming in from Egypt. Almost 10 – 15 trucks laden with onions are also coming in from Afghanistan through the Attari-Wagah land route in Amritsar.
While the government is trying to allay the anger of Indians kept bereft of the kitchen staple whose prices are going through the roof, the question to ask is ‘what exactly led to the surge in the prices?’
Delayed monsoon & unseasonal rainfall – Two main reasons for the shortage and the subsequent price rise of onions are one, the late monsoons that led to the delayed sowing of the crop and two, the unseasonal rainfall at the time of harvest.
Heavy unseasonal rainfall had locked the latest onion produce in wet fields throughout major growing states of Karnataka, Maharashtra and Telangana leading to its price rise everywhere across the country, reported the Economic Times. With rains nearly one and a half times more than normal in Maharashtra between October 1 to November 6, double the rainfall from the past year in Karnataka and 65% more than usual rainfall in Telangana, the deluge that occurred contributed to a damaged harvest.
54 lakh hectares of crops are said to have been badly damaged due to the rains, with around 50 percent of the crop being affected due to the delayed withdrawal of the monsoon.
By how much have the prices risen?
Lasalgaon in Nashik, the largest onion market in the country that sets the price trend for the crop across the country, saw wholesale prices at the start of January at Rs. 500 – 600 per quintal. These surged to over Rs. 1000 per quintal after May.
At first the retail prices hovered at around Rs. 80 – 90 per kg, but today most of the states have seen it go above the century mark.
In the national capital, the retail price is Rs. 140 per kg, in Bengaluru, the retail price is hovering around Rs. 100 per kg and the wholesale price stands at Rs. 90 per kg. In Howrah, West Bengal, the crop is being sold at anywhere Rs. 120 – 150 per kg. In Mumbai’s retail markets too, onions are sold at Rs. 110 – 120 per kg.
At the end of November, wholesale prices too had shot up to Rs. 100 per kg in Maharashtra. Delhi saw much lower wholesale rates at the time – at Rs. 30 – 60 per kg due to the fresh supply from Rajasthan. The rates for top grade onions have jumped to Rs. 5,400 per 40 kg bag at Nashik.
Belagavi recorded the highest wholesale rates with prices for good quality bulb soaring to Rs. 15,000 per quintal at the APMC auction there.
What is the government doing?
The government has kept a keen eye on the fluctuating prices of the crop. Its decision to import 1 lakh tonnes of onions is the latest move at controlling prices.
The government also reduced the stock holding limit for retailers and wholesalers to 5 tonnes and 25 tonnes respectively, down from 10 tonnes and 50 tonnes. These stock limits do not apply to imported onions. A complete export ban on raw and processed onions too has been imposed on the farmers and traders.
Norms for imports have also been relaxed with the size of onions to be imported expanded at 40mm – 80mm, consortium bidding to be allowed and exporters being able to offer shipments in multiple lots. Fumigation conditions have also been extended on imported onions in a bid to improve domestic supply and manage the surging prices.
But what about the farmers?
The export ban by the government and the restrictions on stock limits only hurts us, the farmers say. With warning signs of impending shortages very apparent, farmers speaking to the ET said that it had the government acted by increasing own stocks and putting timely exports in restrictions, it could help control the sharp fluctuation in prices.
The imposition of stock limits has affected demands at the mandis. Farmers are unable to sell their produce which is perishable and deteriorating in quality every day. The ban too has hit them hard – with the country producing about 23.5 million tonnes of onion (2018) and consuming only about 14 million tonnes, the exports were necessary to maintain prices and ensure that farmers get profits.
Speaking to ET, Danish Shah, a third generation onion exporter from Maharashtra said, “When onions are harvested during December to June, farmers are forced to sell it at non-remunerative prices. Only exports can help to maintain the price levels during this time.” This he says, farmers only think of as an appeasement measure towards urban voters.
Ajay Nerkar and Milind Darade, a trader and a farmer from Maharashtra said that the government only intervened in the case of a price rise, but never came to the rescue of the farmers when onions were selling at Rs. 1 per kg or Rs. 7 per kg in the previous years; a rate which is way below their production cost.
Farmers may currently be getting higher rates for their produce, but one must understand that most of them have lost 50 percent of their crop due to the rains and the humidity.
India’s inflation problem
India’s retail price inflation rate climbed to 4.62 percent year-on-year in October 2019, the highest in over a year and above market expectations of 4.25 percent reported Trading Economics.
Food prices rose 7.89 percent in October, with main upward pressure coming from vegetables (26.10) percent due to onion and tomato prices increasing due to unseasonal rains.
Data by the ET showed that core inflation that excluded energy food items slowed to a low of 3.47 percent in November compared to 4 percent in October, reflecting a slowdown in the economy. Pulses inflation shot up to 11.72 percent from 8.4 percent month on month. Urban and rural food inflation rose to 10.47 percent and 6.42 percent respectively.
The Consumer Price Index (CPI) inflation at 4.62 percent in October, as investors note, was entirely driven by higher food inflation. According to an investor at Motilal Oswal, all items within food except meat and fish, exhibited higher inflation in October, with the highest contribution coming from vegetables where inflation accelerated to 26.1 percent. Inflation also accelerated to 3.1 per cent in ‘milk and products’ and 2.2 per cent in ‘cereals and products’. The aforementioned three items together constitute 22 per cent weight in the CPI basket.
Case studies by the ET in metro cities show that consumers in Delhi and Chennai have been shelling out more for pulses that what consumers in Mumbai or Kolkata. Delhi’s sugar prices move in step with the CPI than Mumbai, Delhi or Kolkata and Mumbai pays lesser for rice than Delhi does.
Most vulnerable of these are the rural households with a low spending capacity.
Political reactions
The Sentinel Assam reported how issues of price hikes in essential commodities in the state rocked the Assembly on Wednesday. MLA Ajanta Neog stating that inflation was affecting every household said, “The government does not have control over the retail market. There are syndicates for each item — fish, eggs, and vegetables to mention but a few. The BJP-led coalition talked of ‘Ache din’ (good days) before the polls, but we have not seen their much-touted ‘Ache din’!”
Newly appointed Maharashtra CM Uddhav Thackeray has also directed officials to take measures to control onion prices and asked them to submit a note before the government for the spike in rates and how the volatile prices could be managed, The Indian Express reported. The Maha Vikas Aghadi had announced a disbursement of compensation to farmers affected by unseasonal rains and promised to grant a complete loan waiver to farmers for which, officials report, Rs. 6000 crore is needed.
Onion prices caused a furore in the Parliament after Finance Minister Nirmala Sitharaman said she didn’t care much for onion prices as she came from a family that did not including them in their daily diet.
Ashwini Kumar Choubey, Minister of State for Health and Family Welfare too gave out a remark saying he didn’t know the situation about the onion price rise as he’d always been a vegetarian.
Opposition leaders and the public had found both these statements to be extremely insensitive and casteist in the current scenario when India was struggling to buy the bulb at nominal prices.
Amidst the crisis, Nanasaheb Patil, Director, National Agricultural Co-operative Marketing Federation of India (NAFED) has said that the prices of onions will not come down and are expected to stabilize only by the first week of January.
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