Traders, touts behind teary tale of onion price hike

Despite increased supply to market, prices soared due to intermediaries

The supply-demand theory (more the supply less the price) appears to be a passe. The APMC (Agriculture Produce Marketing Committee), Bangalore, seems to be following its own theory as far as onion trade is concerned: More the supply more the price!

Consider this: Total arrival (supply) of onion at the APMC on Monday was 76,626 quintals, and wholesale prices ranged from Rs 3,200 per quintal (medium size) to Rs 600 per quintal (small size). On the same date last year, the arrival was 39,081 quintals and the price ranged from Rs 1,100 per quintal (medium size) to Rs 400 per quintal (small size).

And, more importantly, about 95 per cent of arrivals on Monday was local supplies (within the State).

A quick look at the arrivals and prices of onion at the APMC show that prices in the APMC this year has shot up despite increase in supply. Manipulation of the market by a network of traders and agents is said to be a reason for onion becoming a real tearjerker for consumers of late.

Supply of onion in September last year was in the range of 39,000 to 40,000 quintals per day, and the prices (wholesale) remained in the range of Rs 1,300 to Rs 400 per quintal.

But this year, the prices shot up abnormally touching the peak of Rs 6,000 per quintal recently. Grade ‘A’ onion (also called Puna variety) was sold at Rs 85 till recently.

Traders and agents have, however, attributed steep increase in prices to the recent heavy rains damaging the crop in Karnataka, especially onion-growing districts of Bagalkot, Bijapur, Dharwad, Chitradurga and Belgaum.

They also argued that the traders in major onion markets of neighbouring Maharastra (Nashik) and Andhra Pradesh (Kurnool) are releasing the stock in phases to maintain the high demand. Interestingly, majority of stock from Maharastra and Andhra Pradesh is of ‘A’ grade quality.

A study by the Institute of Social and Economic Change (ISEC), Bangalore, titled “Competitive Assessment of Onion Markets in India - 2012” has established how big traders and agents form a cartel and manipulate prices, affecting both farmers and consumers. “No doubt rains have damaged the crop in some places. But it is also true that market intermediaries control prices. They have ensured that prices remain high despite good supply in the last few years,” A V Manjunatha, one of the authors, explained.

The study, conducted on behalf of Competition Commission of India, GOI,  has examined reasons for instability in onion prices in the country, including Karnataka, which is the third largest onion producer.

Manjunatha said traders and agents across markets are well connected. They share information on supply and demand, and fix price in advance. Lack of information for farmers, high transportation cost and lack of competition among traders and agents are also contributing to fluctuation in prices, he added.

Steps should be taken to break any cartel that affects farmers and consumers. Competition should be created by issuing more licences to operate in the markets.

Besides, entry of major private retailers like Reliance will greatly help control prices. “Instead of allowing traders to hoard, farmers should be helped to store by providing storage facility in the market,” he said.