Govt has the weapon to control onion prices, but lacks will

Onion prices that had shaken many a government in the past, is now hitting the pan-India roof, and in all probability in the next seven days, the prices will spiral completely out of control.

On Tuesday, at the country’s largest onion market at Lasalgaon Agricultural Produce Committee (APMC) onion prices ruled at Rs 5,600 per quintal, the highest this year, with retail price hovering between Rs 75-80; the trend shows that the graph will continue to move north.

The government in its bid to stem the shooting up of the country’s staple vegetable is desperately trying for an artificial price stabilisation by seeking small quantities of imports from across the border, instead of rummaging inside the basements of the godowns where the crop is secretly stored to take advantage of the rising prices. Agrarian experts say that it is time for the Centre to enforce Essential Commodities Act, 1955 (ECA,) if at all it is serious about reining in the prices.

Despite the knowledge that there is a history of onion prices bringing down governments, the ruling party at the Centre continues with its tinkering exercises, instead of going in for surgical solutions. When the prices started going up in March, the government started blaming it on poor crop production and shortage of storage facilities with government departments.

Ironically, it is the very same shortage of storage that has been exploited by the traders to manipulate the price mechanism and make a killing. With the Ganesha festival season coming to a close and the Navratri season round the corner, the traders are rubbing their hands in glee, in the hope of making a bumper profit.

Officials in the food and civil supplies department express disbelief at the Centre’s refusal to see the writings on the wall. The only way for the government to douse public anger, they say, is for the Centre to bring onion under the ECA, even at the cost of displeasing the powerful farmer-producer cartel which controls the storage facilities.

In 1998, onion prices in wholesale market touched Rs 3,200 while in the retail it oscillated between Rs 70-90 and the result was the BJP led NDA government suffered a series of debacles in state elections in Rajasthan, Delhi and Madhya Pradesh. It was a bitter lesson learnt and the government was forced to admit its erroneous policy and for the first time onion was put under ECA.

Teary-eyed

While political parties realised that onion can make them teary-eyed, farmers—big and small—went on to increase onion acreage which of course led to an increase in production. In a span of two years the increase in production led to a glut and the prices collapsed to Rs 150-200 per quintal; farmers came out on the street in Lasalgaon and it was during this period Sharad Pawar the present Union agriculture minister and one of the most powerful farm-produce traders’ lobbyists, floated the Nationalist Congress Party (NCP).

The two parties --the Congress and the NCP -- fought the state Assembly elections separately but forged a post-poll alliance. The Congress in a bid to woo the farm-produce traders’ cartel to its own side introduced market intervention policy during the glut by buying onion at Rs 300 to Rs 350 per quintal. However, the Maharashtra government burnt its fingers as it was the low-shelflife Kharif crop and by the time it reached ration shops the price was Rs 5 per kilo while outside the shop the road-side vendor hawked it at Rs 3 per kilo as the open market price had gone down to Rs 1.50 per kilo.

The state government which had bought onions in tonnes from farmers to make their storage houses stench-free of rotting onions, dumped two lakh quintal of crop in the ravines, incurring Rs 182 crore loss; the NDA at the Centre refused to share the losses and the Congress still shudders at the very mention of the incident.

In 2004 onion was removed from ECA; however, post-1998 also ushered in a significant change with several big farmers acquiring high-technology storage facilities, but small farmers have been still demanding the adoption of minimum support price (MSP) which will help them to keep the farm-produce traders at bay.

But to introduce MSP, the government will have to enforce ECA, otherwise, veteran agro-journalists specialising in onion politics says, it will only carry out token raids like what happened a fortnight ago when Income-tax officials carried out survey on a handful of big farm-produce traders.

There is no provision for any government agency to even carry out checks on storage houses which are being used for hoardings; however, under ECA, state government also are empowered to control the unethical practices through confiscation.

The primary aim of ECA is to ensure protection of public interest regarding supply and distribution of certain commodities and food products so as that it reaches general public and also stops “expected malpractices that are/may be affecting the food for people or larger perspective affecting the normal life of people.” But, the government remains adamant so far with its hands-off policy.