SSB Lecturette Series: The Onion Cry in India

The onion, the most common ingredient in Indian food, is back in the news for all the wrong reasons. The retail price of onions has spiked by nearly 50% in the past few weeks; obviously, it has become much cause for mirth and derision—especially since the common man is in the eye of the proverbial storm.

We can laugh on that weddings were being called off because the groom was not being serenaded by onions, but it’s a serious matter. And of course, political rivals, like the Congress, have been quick to heap scorn on the Bharatiya Janata Party (BJP), which heads the coalition, the National Democratic Alliance, for its inability to contain inflation in such a basic food item. 

    
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A few facts on onion farming:

a)      Onion production in India is carried out mostly by small and marginal farmers—and hence fiscally incapable of manipulating market supplies.

b)      The crop is grown thrice a year: rabi (March-June), kharif (October-December) and late kharif (January-March).

c)      The rabi crop, harvested between April and June, accounts for 60-65% of the annual production and sustains consumers till October-November.

d)     Maharashtra and Karnataka together account for more than half of the country’s onion production.

Reasons for the onion price rise:

1. Onion prices follow a cyclic pattern, and show a tendency to rise from July to September. This is the lean period before the new harvest comes in.

2. A shortfall in production of approximately 5 lakh Metric Tonnes coupled with deficient rains last year and this year has made the ground fertile for speculation and hoarding in wholesale mandis, particularly in Maharashtra which supplies 27% of onions to the country.

3. High prices in addition to fear of even higher prices is leading consumers also to buy more than needed and hoard.

4. Tender to import 10,000 MT of onions was open on August 27. By the time the imported bulb comes into the market, the new Harvest will also come in. Tender to import onions has come in too late in the day.

5. Concerns are also there about whether adequate quantities are available for imports.

6. Price stabilization fund with a budget of Rs 500 crore is too little to make effective market intervention as is clearly seen this year.

7. For effective intervention, the government has to buy at least 20% of the produce at the back of envelop calculation of Rs 8000 crore.

8. Inadequate availability of cold storage.

9. Role of state government who can impose stock limits on onion, crack down on hoarding and speculation is also equally important.

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Steps taken by Government to bring down Onion prices:

The import of onions from Egypt is done essentially to bridge the gap between supply and demand. It worked as prices came down by Rs 10 per kg in domestic market. Another decision was to dissuade the large scale hoarding of onions to create an artificial short supply that lead to spiraling of price

But this is not enough; more cold storage facilities must be availed to help storage of Onion which will be helpful in such difficult times.  Also, budget for price stabilization fund must be increased from 500 crore. Hoarding must be checked before, if the government gets a hint that rainfall is down and will affect the market. 

About the Author:  Pranav Nikam is an Electrical and Electronics engineer who is working in a renowned MNC in Chennai. He likes to work out in gym, do photography and play badminton. Through his articles he wants to spread awareness among other defence aspirants.