Onion prices plunge to 5-year low, reduce growers to tears

It’s now the turn of growers to be in tears over onion prices, which have plummeted to a five-year low. 

This has now led to growers’ organisations such as the Shetkari Sanghatana demanding the Centre to keep away from any intervention such as imposing stock limits or minimum export price or banning shipments to help fundamentals to dictate the terms in the market rather than policies.

Lowest in 5 years

Currently, the weighted average modal price (the rate at which most trades take place) is ₹1,100 a quintal, the lowest since 2018, when it ruled at ₹837. 

“Government policies over the last 10-20 years are responsible for the current low prices farmers are getting for onion. Farmers are not even able to recover production costs,” said Anil Ghanwat, President, Shetkhari Sanghatana. 

Production costs of onion are currently ₹15 a kg and another ₹5 goes towards storage. “It is unlikely that onion prices will rise above ₹20 this year. The Centre can help farmers by procuring onion at ₹30,” he said. 

Lack of exports demand

One of the reasons for onion prices ruling low currently is lack of demand, particularly in the export market, according to Ajit Shah, President, Horticultural Produce Exporters’ Association (HPEA). 

“Export demand for onion is slack on fears of recession. There are other reasons too, particularly the on-and-off ban imposed by India on the bulb’s exports,” he said. 

Over the last five years, India has banned onion exports at least twice. In 2019 and 2020, the shipments were banned as domestic prices in retail outlets soared to ₹100 a kg. 

Prices had surged both the years as the onion crop, particularly in Maharashtra, was affected by unseasonal rains.

“For example, Bangladesh used to import a good volume of Indian onions. The bans in 2019 and 2020 have resulted in Dhaka turning to countries such as Turkey and Egypt,” said Shah. 

“Bangladesh is now encouraging its growers to produce more onion. It has begun to import onion seeds,” said Ghanwat. 

But there is some hope for Indian onions as floods in Pakistan have affected the crop and this, in turn, could lead to export demand. 

“There is demand from Pakistan for Indian onion after floods wreaked havoc, but we do not trade with the neighbouring country,” said Shah.

According to Vikas Chaudhary, an onion trader-cum-exporter in Nashik, some Indian onions are finding their way into Pakistan. “In fact, prices have improved marginally because of this,” he said. 

The Nashik-based trader-cum-exporter said there were ample stocks of onion in the country and compared with that the demand was low. “Usually, prices will tend to rise after Ganesh Chathurthi and they may increase to ₹20-25 a kg. Definitely, they will not go beyond ₹40 a kg like last year,” Chaudhary said. 

Onion reserve

The Centre has built a record 2.5 lakh tonnes of onion reserve that ensures better prices to farmers and protects consumers from any sudden spike.  

“Besides periodic bans, farmers have been affected by raids conducted on traders by income tax and enforcement directorate officials when prices surge, besides the enforcement of stock declaration,” said Ghanwat. 

These measures are affecting investments, particularly in constructing storages. “Currently, whatever storages we have to store onion are all owned by growers,” he said. 

This year, there are reports of some farmers shifting to other crops from onion but so far data to provide a clear picture is lacking. However, there have been no reports of any major damage to the crop due to monsoon rains.

“Rains will 100 per cent be beneficial to the crop. Any damage to the crop has been limited,” said Chaudhary. 

“The kharif onion crop is shaping up good. It is almost ready in Karnataka and Andhra Pradesh. Arrivals are set to begin. Prices could remain at current low levels between ₹1,000 and ₹1,300 a quintal,” said Shah.

During the 2021-22 crop year that ended in June, onion production was estimated at a record 31.70 million tonnes (mt) compared with 26.6 mt the previous year. 

“The Centre should at least assure that there will be no intervention from its side in the onion market for growers to get a good price,” said Ghanwat. 

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