Onion prices set to make UPA govt cry

Onion prices, which had once brought down governments from pedestal, are once again perched on a threshold waiting to snap the leash and spiral out of control, as the supply of the crop is markedly dipping with each passing week, and the stage is  set for an artificial price escalation of the crop.

Notwithstanding a statement made by Union commerce minister Anand Sharma on the floor of Rajya Sabha, last Wednesday, ruling out a ban on onion exports and claiming that there was an adequate crop stock, the quantum of supply in the nation’s onion county --Nashik has been on a decline since January. Agriculture produce market committees (APMCs) in Nashik district of Maharashtra -- which is the largest onion producing region -- fear that the dip in production will be more and they are waiting to see the production of summer crop or rabi harvesting. Last week, Lasalgaon (Nashik) APMCs recorded average wholesale price in the range of Rs 1,050 a quintal; a week before that the market had recorded the average price in the range of Rs 830 a quintal. Going by the trend in all APMCs in the region, the graph reveals that the prices are on the rise; local media abounds with reports prophesying a probable repeat of what happened in 1998 and again a couple of years ago, when following sky-rocketing of onion prices, public at large demanded a ban on crop export.

Onion economics

In order to comprehend the onion economics it is important to understand the crop cycle. The monsoon sowing is harvested between October-November, i.e during Diwali period. This rain-fed kharif onion has a very limited shelf life; it has high-moisture content and is dark red in colour with thick layers or peels. It takes care of the supply till December-January period when late kharif crop is harvested which lasts till March.
In March-April, the harvesting of rabi or summer crop is undertaken; the onions harvested in this period is light pinkish in colour with extremely thin skin or peels and has a shelf life of more than six months. The rabi harvest takes care of the country's supply till the next October-November. The year when rainfall is below average, kharif crop fails and the rabi stock gets quickly exhausted the prices shoot up. And this is what is happening this season. Local media has started dropping hints of the hoarding by big farmers and traders who have storage facilities; it is a 1998 script when during Vajpayee government regime, the BJP lost four state Assembly elections. The retail price of onion had then shot up to Rs 80 a kilo; the Congress made an issue and the BJP paid a heavy price for it.

The year then had seen a total production of 36 lakh tonne as against 42 lakh tonne; the scarcity was serious, and by the time BJP tried to find a solution, it was too late. The BJP government in a bid to increase the kharif crop shelf life, at the behest of BARC scientists, set up a multi-crore irradiation centre in Lasalgaon; it didn’t find success and now the centre is being used for irradiating spices and pulses.
However, the 1998 scarcity led to an increase in onion acreage with an increase in production; but the cycle continues to break every two to three years bringing about scarcity.
The rabi harvesting has started, but the prices which usually start going down after the arrival of summer crop is not showing any downward slide. Officials from Lasalgaon APMC have already made their apprehensions clear; the late kharif crop has almost ended and the arrival of summer crop is also nearly complete, but there are no signs of prices coming down. The supply figures also show that there is a marked decline from 15,000 quintals to 12,500 quintals a day. The indications are that the summer crop, having a long shelf-life, instead of finding its way into market is finding its way into godowns. The farmers are hoping for a good price, and so do the traders who are at present eyeing the export market.

The year has already seen apart from an acute short-fall in kharif harvest, a dip in the transportation of up-country supply because of the congestion of rail traffic due to Kumbh Mela; the farmers and traders were just not able to move the stocks as no rakes were available and ironically, this had brought down the prices in APMCs for a brief period as well as dumping of rotting onions in the hills.

The coming months, going by the Nashik and mofussil media reports, will witness an explosion of onion prices and the government will find it hard to even control the artificial stabilisation.