Agitation comes after government bans onion exports with immediate effect
Image Cortesy: PTI
A day after the Centre banned the export of onions and imposed stock limits for traders, the auction at the country’s largest wholesale onion market at Lasalgaon, Nashik was halted by farmers protesting over the fall in prices. Farmers also staged a ‘rastaroko’ on the Mumbai-Agra highway at Umrane and at Vincur on Nashik-Aurangabad road.
The government banned exports in a bid to tame prices that have doubled in the domestic retail market since July.
Farmers staged demonstrations at the Lasalgaon Agriculture Produce Market Committee (APMC), but the auction was resumed later in the day, traders said. At some Agricultural Produce Market Committees (APMC), the farmers forced the wholesale mandis to close as auctions started on very low quotes – an official said that onions from six trucks were auctioned on Monday with minimum price being Rs. 2,601, maximum being Rs. 3,351 with the average at Rs. 3,065 (a Rs. 600 drop).
In other markets, those who had brought thousands of quintals of onion for sale, were stranded for the entire day as the traders stopped auctions demanding clarity on government orders.
The imposed stock limits of 100 quintals per retailer and 500 quintals per wholesaler made onion producers in Lasalgaon see red. It is interesting to note that while in the past, the Centre had authorized the State to impose stock limits, this time it has imposed these limits on its own.
The commerce and industry ministry amended the export policy of onion, making it ‘prohibited’ from ‘free’ earlier.
The onion has always been a politically sensitive crop in India.Farmers allege that the Centre took the decision to ban exports and impose stock limits with an eye on the Maharashtra Assembly polls. This decision, they said, was taken despite onions being expected to arrive from the South as well as Pune, Chakan, Ahmednagar and Nashik in the next three weeks, naturally reining in the prices.
How It All Started
Onions have been everywhere in the news this past month. While retail prices of onions, a key cooking ingredient shot up to Rs. 70 – 80 per kg in Delhi owing to last year’s drought and depleted supplies after months of incessant rainfall in producing states, in a bizarre incident of dark humor, a farmer reported a theft of onions worth Rs. 1 lakh in Nashik.
But it is not just the rains that are to blame for this surge. The profiteering by traders by marking up prices has led middlemen to make a huge killing in just a few days. Big traders and distributors are heavily marking up their prices to the tune of 51% and 48% of the original price respectively. Given all the data on the production of onions, the only explanation is that the supply of onions is being artificially restricted by cartels operating out of Mumbai and Bengaluru hoarding huge stocks to drive up prices.
The season of Navratrialso adds to the spike in the prices of onions when the consumption of the vegetable goes down.
What Did The Government Do To Help?
With Maharashtra and Haryana Assembly elections only a month away, the government had to walk a tight rope – of not upsetting farmers who are an integral part of their rural voter base, and pacifying urban consumers who are seen shelling out more money for the bulbous vegetable following the surge in prices.
On September 6, the state-run Metals and Minerals Trading Corporation (MMTC) floated contracts for importing 2,000 tonnes of onions from Pakistan, Egypt and China among other countries. MMTC later dropped Pakistan from the list. The Centre also hiked the Minimum Export Price (MEP) to 850 dollars per tonne.
Anticipating the shortage, the Centre had created a buffer stock of 57,000 tonnes of which 18,000 tonnes have already been offloaded. With supplies through agencies like the National Agricultural Cooperative Marketing Federation (NAFED) and National Cooperative Consumers Federation of India (NCCF), the supply of onions will be boosted, said Agriculture Minister Narendra Singh Tomar. These organizations are selling onions from the buffer stock at Rs. 22-23 per kg, while Mother Dairy’s Safal stores are selling it at Rs. 29.30 per kg.
The government has also asked states to take strict measures, including raids, to prevent hoarding by traders.
Onions and Elections – Deep Fried Politics
To provide harrowed consumers some relief, Delhi CM ArvindKejriwal said that onions procured from the government’s buffer stock would be sold at 400 fair price (ration shops) and 70 mobile vans between 10 AM and 5 PM between all assembly constituencies. Each person would be able to buy a maximum of 5kg at Rs. 23.9 per kg.
The BJP condemned this move and alleged that the Delhi government was trying to earn a profit from the sale of onions. It claimed, “The Centre is selling onions at Rs. 22 per kg and supplying it to Delhi government for Rs. 15.9 per kg to ensure that there is no scarcity. By selling it at Rs. 23.9 a kilo, the Delhi government is trying to earn profits.”
The small bulbous crop, the onion, has even in the past shaken up governments from their core.
They became a poll issue in the 1980 general elections when Indira Gandhi used the price rise to her advantage during campaigning to show how uncaring the then Prime Minister ChaudharyCharan Singh had become of the ordinary people. It clicked. The Congress won 67% of the LokSabha seats.
In 1998, a sharp price rise in onions, dethroned the BJP government of Chief Minister, MadanlalKhurana in Delhi thereby establishing a new metric for good governance – the price of onions.
In 2010, tables turned when errant rainfall in onion producing regions led to a country-wide shortage of onions. Recognising the political dangers of expensive onions, an otherwise reticent Prime Minister Dr. Manmohan Singh described it as a “grave concern”. Exports were stopped, import duties were cut and the government appeared to be in damage control mode.
The BJP also suffered a stinging defeat in Rajasthan credited to the lowly onion. After his loss, Chief Minister Bhiaron Singh Shekhawat was famously quoted as saying – “The onion was after us.”
Battling the Price Rise – A Long-term Solution
A ban on exports is a sub-optimal solution. Instead of the current ad hoc measures that the government is applying to augment efforts should be channelized into investing in scientific storage and processing facilities.
It would also do well for policy makers to look at the reported suggestions offered by Ashok Gulati, former Chairman of Commission for Agricultural Costs and Prices to tackle the onion crisis. He has underscored the need to promote modern cold storages and develop a system similar to that of the warehouse receipt system for farmers.
Farm experts also favor setting up dehydrating units and promote demand for dehydrated onions amongst large consumers.
In conclusion, it is evident that the government needs better policy responsessuch as creating more refrigerated storage facilities so that surplus onions can be stored longer. Apart from that, it needs to increase the rate of processing of onions through incentives, so that consumers can quickly substitute onions for onion paste and dehydrated varieties in times of crunch.
Keeping in mind the production data and the weather forecasts, policymakers need to put together a comprehensive picture of supply-side situations much in advance, so that a stitch in time saves nine.
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