A network formed by commission agents and wholesale traders in Maharashtra and Karnataka with wholesale traders outside their States could be behind the surge in onion prices, which have currently zoomed to Rs 80 a kg at retail outlets.

This could be true if one were to go by the assessment of onion markets in a report submitted to the Competition Commission of India last year after prices soared to Rs 100 a kg at retail outlets in December 2010.

The assessment, prepared by the Agricultural Development and Rural Transformation Centre in Bangalore, said the network operated covertly underusual marketing practices.

Almost all wholesale traders in Maharashtra and Karnataka got the information on the prices of onion from contacting commission agents and wholesalers operating in various markets.

“This indicates the existence of strong networks not only in the market they are operating in but also with market functionaries in distant markets,” the assessment said.

The centre’s team, which made field visits to Hubli and Belgaum Agricultural Produce Marketing Committee (APMC) yards, witnessed price fixing and rigging of bids.

“The quantity and price of onion were decided over phone a day before the market opened,” it said, adding that a major reason behind the collusion was the presence of big traders and commission agents.

Giving an instance of collusion, the centre said that during its visit to Ahmednagar APMC, bidding for a lot started at Rs 300 a quintal.

It went on until one trader quoted Rs 400 and another Rs 405. The commission agent stopped the bidding and asked both of them to share the lot.

In Washi market, farmers complained that their produce was auctioned through a secret bidding.

The assessment said that there were wide variations in the net margin or profit earned by retailers across the country.

Retailers in urban centres such as Bangalore and Pune got much higher margins.

“Retailers from these centres not only benefited in terms of higher margin but also on account of large quantity of sale,” it said.

Retailers mark-up over the wholesale market price was over 150 per cent in almost all major centres during the crucial period in December 2010.

“The December 2010 episode was not simply demand (buyers) and supply (farmers) problem,” it said, adding that export of over one lakh tonnes of onion during the period also compounded the situation.

Drawing conclusions on its assessment, the centre said the trade was unilaterally dictated by traders and not farmers.

Reasons for this were that the average farm size of onion growers was low and unfavourable weather conditions and price risk for these small farmers resulted in a minimal role for them in “price formation”.

Also, farmers look at local market rates for reference, while traders compared rates of all markets, including distant and export, before deciding where to send the consignment. This also put the growers at a loss.

It recommended that the Government should allow new commission agents and traders should be encouraged through incentives such as new licences, provision of space for shop, storages and other infrastructural facilities.

Licences of traders who hoard onion should be cancelled and no secret bidding of onion should be done, it said and added that cooperative marketing societies must be encouraged to take part in trading in order to avoid collusion among traders.

The assessment also called for a better system to forecast crop output and a national price information system to disseminate price data.

Also, the National Agricultural Cooperative Marketing Federation should procure onion from the market and not traders to bring in competition, it said.

It also called for changes in the APMC Act to plug loopholes in the supply chain.

> subramani.mancombu@thehindu.co.in

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