With retail inflation inching up, contrary to expectations of a downward movement, industry body Assocham on Tuesday cautioned the Government to be watchful of onion prices, which may increase further by 10-15 per cent in the current rainy season, damaging the essential kitchen item while stored in warehouses.

Besides, the gap between retail and wholesale prices should be reduced. While onions are selling at Rs 1,800-2,500 per quintal in wholesale mandis, retail vendors are charging upwards of Rs 30- 35 per kg.

"Any rise from this level will exert pressure on the consumer price index inflation. The onion, being an essential item, evokes sharp reactions from households and even political parties. Thus, there is a need to be watchful," Assocham Secretary-General D S Rawat said while releasing a study paper.

Apart from the harvest losses, a significant part of production is lost in post-harvest storage and exposure. Hence, proper aerated storage is essential to keep the commodity fresh till it reaches consumers and bulk users.

Maharashtra, Madhya Pradesh, Karnataka and Gujarat contribute over two-thirds of the all-India production, with Maharashtra alone accounting for about 30 per cent of the production.

The monthly consumption of onions in India ranges from 8 lakh tonnes (mt) to 12 lakh mt depending on the season and prices. Thus, assuming an average consumption of one million mt per month, the annual consumption on an all-India basis is around 12 million mt. Considering storage and handling losses, the annual domestic requirement of onions is nearly 14 mt.

India accounts for over half the import share in Malaysia, Bangladesh, Sri Lanka, Indonesia, Nepal, Kuwait, Oman and Qatar, besides regular exports to the UAE, Saudi Arabia, Singapore, and Vietnam. Thus, India leads in onion exports in the Asian continent. Small quantities of value-added onion products viz. onion powder and onion flakes are also exported, noted the study.

Assocham has suggested timely and realistic crop assessment and a state-wise estimate of consumption requirement with proper understanding of peak demand period per month and volumes as a pre-requisite for prudent handling of the developing situation in onions.

The Government has decided to buy 30,000 mt onions through SFAC and NAFED for creating a buffer. However, this quantity is grossly insufficient and the Government should rework the buffer requirement. Given the all-India production of 15 mt, ideally a 1 to 5 per cent buffer (or one month’s consumption need) will ensure comfortable sailing through the year, said the Chamber.

In the absence of a minimum support price for onions and effective support operations, prices tend to drop steeply during the peak arrival season. In the current year, prices have shown signs of collapsing and the Government should take prompt action to mitigate the woes of anguished farmers, the chamber said.

Further, on the distribution front the Government should create a network of outlets, preferably through NAFED, state co-operatives, Mother Dairy, and civil supplies outlets. During periods of high prices, these outlets should start distributing onions across the country at pre-determined prices without adding to their margins.

Onion requirements are almost constant throughout the year and the availability of fresh onion is limited to 7-8 months. There is, therefore, a need to plan stock management (including buffer).

In order to prevent a sudden spike, state-level agencies should consider distribution of onions from July and also ensure gradual liquidation of stocks instead of holding it till the end of the season, which could result in financial and logistics implications, Assocham added.