Onions: farmers on way to ‘tears of joy’?

With the recent MSP hikes to at least 150% of A2+FL for many major crops in India, the government has not only fulfilled its promise but has also boosted farmers’ confidence by reinforcing certainty that their produce will fetch a good price. Procurement of wheat and rice over time in a steadfast manner has led to stability in production levels and self-sufficiency.

The notion that benefits of MSP declaration and procurement is limited beyond growers of these two crops now stands challenged. This is thanks to upscale in procurement of other crops at MSP, say pulses and oilseeds, which have been at record highs. Along with this, innovative steps that are addressing both input costs and output sale for farmers are welcome steps and will surely help in achieving the target of doubling farmers’ incomes by 2022.

By maintaining a strategic buffer stock of pulses under the Price Stabilisation Fund (PSF), coupled with a bumper production, availability is assured and pulses’ inflation is under control. This beautiful snapshot above is actually just part of a bigger landscape that will have to be viewed with a different lens.

The distinction made is with respect to vegetables. And the lens may be restricted to two main factors, namely, the operation of MSP, etc., and the degree of perishability of produce. The dynamics faced by the grower on these two fronts varies with the produce — not all farmers produce crops that are backed by MSP. Similarly, at the consumer end, per capita consumption and per capita expenditure varies between food items, and the latter is higher in cases of vegetables vis-à-vis cereals, with a distribution, based on, say, income, more so in urban areas. Simply put, MSP-backed crops are, in most cases, grocery items in a consumer’s basket, like rice, atta, dal, oils, etc., which she buys only twice or thrice in a month, whereas items like vegetables and milk are purchased daily and the bill for such daily items is generally 2-3 times more than that for groceries.

An essential distinguishable factor between vegetables and cereals is the degree of perishability.

Vegetable cultivation can be similar to investing in small and mid-cap stocks, that is, it can give you bumper returns or it can cause considerable loss. Also, there is no stop loss (MSP) in this case, barring some market intervention by some states, which are not very frequent.

If a ‘vegetables’ page in a daily newspaper was page 3, then onion, undoubtedly, would have been the superstar, which likes to be in the news all the time. This may be attributed to seasonality in arrivals of this crop and its importance in Indian food habits. We did a quick analysis of arrivals of onion during the last four years using Agmarknet data.

The arrivals in major producing states like Maharashtra, Karnataka, Madhya Pradesh and Gujarat (accounting for nearly three-fourths of total arrivals) declined by more than 70% when
comparison is made between peak season and lean season. During April-June, the arrival of onion (Rabi) is usually bumper and crashes down mandi prices, thereby hurting growers badly. During September-November, the arrival declines considerably, causing prices to go up during the festive season, and cools down with Kharif arrivals. So, the major issues here are seasonal arrivals and the perishable nature of this crop.

Here is where ‘Operation Greens’ can prove to be a game-changer. Operation Greens, introduced in the 2018-19 budget announcement, aims to promote farmer producers’ organisations (FPO), agri-logistics, processing facilities and professional management.

These strong backward and forward linkages will not only boost economic activity and employment but also augment the value chain, boosting farmer incomes with smoothening out price fluctuations, making it a win-win situation for both farmers and consumers.

Setting up of mega food parks will also provide the much-needed impetus in this context. The role of agriculture extension and FPOs/farmer cooperatives will be key in spreading awareness and capacity-building.

India has many onion-processing units, mainly drying units. However, most of such produce is devoted to exports and the rest for industrial use. Thus, such produce may be incentivised for intermediate uses, say, by manufacturers of processed foodstuffs initially, with a shift to direct consumption being gradual over a longer time horizon.

Further, establishment of storage facilities near consumption centres will also help. Creating and scientifically managing a buffer stock, created out of excess arrivals, and disposing during the lean season, will help stabilise prices. Retail prices in Delhi (August–September) were more than double the mandi prices in Nashik for the same period. Supply chain management in case of vegetables, especially onion, should be done in such a way that consumers pay a reasonable price and a significant chunk of it finds its way to farmers’ pockets. These steps, amongst others, will make way for tears of joy!

(Bansal is Junior Statistical Officer and Asha, Assistant Director, Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution, Government of India)