As onion gets costlier, govt's measures to rein in prices anger farmers

Just when the common man heaved a sigh of relief with a decline in tomato prices, it seems it’s the turn of onions now to burn a hole in people’s pockets. Prices of the bulb have started soaring across the country.

Several traders stated that the late onset of the monsoon has adversely hit supplies, as a result of which retail prices have increased. They may further shoot up to around Rs 60-70 per kg next month.

The increase in domestic prices of onions coincides with a sharp jump in its exports. As per trade data available on the Department of Commerce portal, onion exports reached 6.38 lakh tonnes during April-June 2023, which is 26.51% higher as compared to the 5.04 lakh tonnes recorded during the corresponding period last year. The increase in onion exports has been even sharper in June this year. That month, India exported 2.92 lakh tonnes of onions, which is 89.56% higher than 1.54 lakh tonnes in June 2022. 

Treading with caution ahead of assembly polls in four key states that will set the tone for the Lok Sabha elections in May next year, the Union government has stepped in and announced a slew of measures over the last few days to keep onion prices under check. This, however, has angered onion farmers, as they feel an increase in prices would have helped the agrarian community in distress.

What has led to an increase in onion prices?

A report by Crisil Market Intelligence and Analytics attributed the soaring onion prices to the supply-demand imbalance while stating that the prices are likely to show a significant rise in the retail market from early September, reaching up to Rs 60-70 per kg during the lean patch. However, prices will not touch the highs seen in 2020.

The report said rabi stocks in the open market are expected to decline significantly by August end instead of September, extending the lean season by 15 to 20 days, which may expose the market to tightened supplies and high prices. It has listed two major reasons behind it – the reduced shelf life of rabi onion by 1-2 months and panic selling in February-March this year.

The report said onion supplies will ease once kharif arrivals start in October, leading to softening of prices. The price movement in the festive months (October-December) is expected to stabilise, it added.

During the January-May period this year, a fall in onion prices offered some relief to consumers facing significantly costlier cereals, pulses and other vegetables. However, this created a negative sowing sentiment among onion farmers for the kharif season.

“As a result, we expect acreage to decline 8% this year, and kharif production of onion to fall 5% year-on-year. Annual production is expected at 29 million tonnes (MMT), 7% higher than the average of the past five years (2018-2022),” said the report. So, a major supply crunch is unlikely this year despite lower kharif and rabi output. However, rainfall in August and September will determine plantation and bulb development of the onion crop, it added.

What's the government doing to rein in prices?

The Centre has taken note of the increasing onion prices and announced a series of measures including the imposition of 40% duty on onion exports, enhancing buffer stock, and selling onions at subsidised rates.

It announced on Sunday (August 20) that onions would be sold at a subsidised rate of Rs 25/kg from Monday, through the National Cooperative Consumers' Federation of India (NCCF), as it enhanced the onion buffer stock from 300,000 tonnes to 500,000 tonnes. This move is aimed at keeping onion prices in check until the arrival of the new crop in October.

According to an official statement, onions from the government's buffer stock will be made available to retail consumers through outlets and mobile vans of NCCF from Monday.

The government has stockpiled 3 lakh tonnes of onions within the Price Stabilisation Fund (PSF) to address any unforeseen spikes in prices during the period of low supply. Retail sales of onions will be suitably enhanced in the coming days by involving e-commerce platforms, the statement said. The consumer affairs department, on Sunday, instructed both NCCF and the National Agricultural Cooperative Marketing Federation of India (NAFED) to procure an additional 1,00,000 tonnes of onions each.

On Saturday (August 19), the Centre imposed a 40% duty on the export of onions till December 31 to boost domestic availability amid signs of soaring prices. The 40% export duty will make the export of onions less profitable for exporters, and consequently, more onions will be available in the domestic market.

The move came at a time when onion prices have recorded an increase in recent months. As per the price data available on the website of the Department of Consumer Affairs, the all-India daily average retail price of onion was recorded at Rs 30.72 per kg on Saturday, which is 20.75% higher as compared to the last year’s rate of Rs 25.44 per kg.

Why are farmers upset over the government's decision on export duty?

The government move has left the farmers in Maharashtra fuming, as they felt that they were not consulted before taking the decision which will only benefit the traders. Asia’s biggest onion market, Lasalgaon in Maharashtra’s Nashik, was closed on Monday in protest against the decision. The closure of the Lasalgaon onion market may lead to a sharp rise in onion prices in the coming days. Farmers are demanding that the government withdraw the 40% export duty on onions and provide them with a fair price for their produce.

Talking to The Federal, prominent Maharashtra farmer leader Kishore Tiwari said there is nothing new in the seasonal shortage of onion and the government is getting proactive merely due to political reasons. He said the farmers’ anger over the issue of export duty is justified, as an increase in onion prices may have benefitted them. “The onion farmers have witnessed many a crisis in the past. What’s the issue with the government if the farmers get good prices for their produce even though for a short period?” he asked.

“The onion prices would have fallen with the arrival of fresh crops, but for now an increase in their prices would have helped the agrarian community in distress. The government should understand that the rural economy only thrives on the agricultural output,” he added. He wondered as to why the government isn’t equally sensitive about the increasing prices of edible oils and pulses.