The great Indian onion crisis is back: Prices soar 200%

By Anuradha Raghu and Pratik Parija

Onions in India are once more at the epicentre of a major controversy, pitting government officials who want lower prices against farmers that need extra income.

Prices of the vegetable surged more than 200% in September from previous months after flooding from heavy monsoon rains damaged crops and reduced supplies. That’s prompted the government to ban exports and crackdown on hoarding to lower prices, angering farmers who took to the streets on Monday in protest.

READ: India bans onion exports; Asia has eye-watering prices

The onion, whose soaring prices have been blamed for bringing down past governments, puts Prime Minister Narendra Modi in a tight spot. During his reelection campaign this year, he had promised to raise incomes for farmers, a key voting constituency. Yet Modi also needs to ensure inflation remains stable, and food prices are already spiking higher.

The government could be caught in a dilemma, as while it seeks to keep food inflation contained, it also has a promise to raise farm incomes,” said Jason Yek, Asia Country Risk Analyst at Fitch Solutions. “Any measure to artificially depress the price of onions could spur a backlash from the onion farmers.”

ALSO READ: Onion price in Karnataka shoots up by Rs 40-50

This isn’t the first time onions have taken centre stage in Indian politics. In 1998, high onion prices were cited for the Bharatiya Janata Party losing the vote in New Delhi. In 2013, onions were blamed for soaring inflation. Last year, Modi, in his campaign to gain reelection, said farmers are his ‘top’ priority, with ‘TOP’ meaning “Tomato, Onion and Potato.”

Onion prices in India climbed to as high as 80 rupees a kilogram in September, compared with Rs 20 to 25 in July through August. The gains are due to flooding, as well as because farmers reduced onion crops after prices fell to as little as Rs 2 per kilogram in Maharashtra in December, said Siraj Hussain, former farm secretary and a visiting senior fellow at the Indian Council for Research on International Economic Relations in New Delhi.

ALSO READ: Onion prices continue to rule high at Rs 70-80/kg

The government last month released onions from state stockpiles to Safal, the country’s largest organized retail network of fruit and vegetables, which will also cap prices. Authorities will monitor prices, and consider strict action against hoarding and profiteering activities. Exports of all varieties of onions are now prohibited, the government said on Sunday.

The efforts have started working and wholesale prices in some markets are starting to decline, with the arrival of new crop produce from the southern region also helping to ease tight supplies, according to a government official on Wednesday.

Devinder Sharma, a food and trade policy analyst in Punjab with 30 years of experience in food policies, says the government is panicking over surging onion prices. Farmers in some regions are getting paid 75% less for their onions after the export ban was introduced, he said.