A surge in onion prices has now become an annual feature, much like the monsoon rains, which are usually blamed for causing it. Every year, the alleged cause varies — in 2013, the villain was excessive rain, last year it was deficient rain, while this year, unseasonal rains have been blamed. It is not a coincidence that this occurs during the tail end of the monsoon season, because this is the period when the market has to be essentially supplied from stored produce. This means that onion producers are out of the picture, leaving the field wide open for market intermediaries to profit from the situation. This year, for instance, prices in Lasalgaon, India’s largest wholesale onion market, rose from around ₹11 per kg in May — when the crop was still arriving — to ₹57 per kg on August 22, leading to retail prices touching ₹80 per kg in Delhi.
The authorities, both at the Centre and in the States, have clearly learnt a few lessons from past crises. For starters, despite onions and potatoes having become staples, there is no planned strategy to tackle either gluts, which hurt farmers, or shortages, which impact consumers. The Centre’s response has been restricted to periodic bans on exports and imposing minimum export price regulations and controlling import duties on onions. Of late, there have been some storage initiatives by National Agricultural Cooperative Marketing Federation of India Ltd (Nafed), and the Central and State warehousing corporations. This year, the Small Farmers Agribusiness Consortium (SFAC), under the Ministry of Agriculture, had procured 10,000 tonnes under the price stabilisation fund announced by Finance Minister Arun Jaitley last Budget. The MMTC has floated a tender for importing 10,000 tonnes by next month. But unless such interventions are planned and scaled up, they will not have more than a marginal impact on India’s over 160 lakh tonnes per year domestic onion market. This time around, the Centre has also brought onions under the Essential Commodities Act, to prevent hoarding and profiteering. But since there is practically no information available on how much is actually lying in storage, or who exactly is hoarding it, the outcome has been negligible.
India is the world’s second largest producer and consumer of onions. Onions, therefore, should be a solvable problem. What is needed is a strategic and planned response, instead of knee-jerk actions. For starters, onions need to form a part of the government’s market intervention strategy, along with cereals, pulses and oils. Both the Centre and the States need to focus on building storage capacity. The information network needs strengthening, particularly on stored stocks, which can help nip hoarding in the bud. Consumer states can also focus on extending onion cultivation, since it can be grown practically all over the country. Above all, the action needs to be proactive and not reactive.