Commodity Analysis

Onion prices: The power of onion is a hoax

Sathya Raghu | Updated on December 08, 2019 Published on December 08, 2019

Onion is the Indian voter’s most lethal weapon on the ruling party. We saw this in the ‘onion election’ of 1980 when the Janata Party was knocked out.

In 1998, after five nuclear tests and chest-thumping about nationalism, onion prices could not make the BJP shine. In the 2014 general elections, the Congress paid a heavy price for the onion crisis.

Onion, which is the political equivalent of a terror threat in India, crossed ₹140 per kilogram last week, and continues to set record-high prices.

Interestingly, the demand for onion doesn’t vary much. You can’t substitute this with any other vegetable, as agricultural economist Ashok Gulati said.

Myths in ‘onionomics’

Interestingly, onion is not a staple. It accounts for less than 1 per cent of India’s food production. The per- capita consumption of onion is less than a kilogram per month, 800 grams to be precise. Take the example of a family of five. They require 4 kg of onion a month.

If the price is about ₹100, they spend an extra ₹240 per month on onion. This having the power to tilt the powerplay in the country is commendable. So, more than the financial impact, the Indian palate has excess love for this vegetable, resulting in consumers overreacting.

How does it affect farmers?

When prices of vegetables become ‘unaffordable’, everyone talks about importing, and bringing consumer prices down to have a check on inflation.

When prices of vegetables are abysmally low, does anyone talk enough about farmers by offering a minimum viable price for the farmer?

No. Farmers are penalised to keep consumers happy. No wonder, onion farmers, who were expecting to make some profit after four years, protested price reduction and imports.

Factors unique to onion?

Truth be told, factors responsible for increase in the prices of onion and other vegetables are the same. So, the ‘power of onion’ is a hoax.

All vegetables, including onion, have the problem of climate risk, poor productivity, demand-supply mismatch and inefficient supply chain. More than 35-40 per cent of the fruits and vegetables get wasted in India.

Prices of ladies finger, brinjal and other vegetables also increase significantly in some seasons, but often fail to make it to the headlines.

Solutions

Similar to what the Manmohan Singh government had done in 2010 onion crisis, the Modi government is also following a three-step process — banning exports, increasing imports from other Asian countries and mounting raids on traders for hoarding.

Onions got no special treatment compared with other crops. ‘Band-aid solutions for short-term relief’ suppress the prices in short term, but they are a long-term disincentive for farmers. Onion farming is reducing as people increasingly feel that they will not get a fair price.

What else should be done?

Brazil and Israel extensively use open- ventilated onion warehouses and ventilated silos, which are fairly simple and cheap.

Unlike other vegetables, onions do not require cold storage. As an onion farmer who built such ventilated warehouse, I can confidently say that, without much maintenance, onions can last at least three months in such warehouses. Importantly, wastages can be reduced to less than 10 per cent.

Secondly, satellite image-based identification of cropped area can be another way to pre-empt shortfalls. Low-height greenhouses can be used to protect onion crops from environmental risks as they increase productivity and farmer profits. Another solution could lie in processing onion into dehydrated onions for use in emergencies.

Conclusion

The real solution lies in rational thinking and in a strong political will to address the root cause of the problem. Short-term solutions can’t take us far. If rationality prevails, foolishness can find its way out.

Solutions will find their way in. If not, we will be called an ‘Onion Republic’. I am sure, the only thing that God dropped from the blue sky is ‘onion’. Its main purpose is to change the ‘power’ful power centres.

The writer is co-founder of agri start-up Kheyti

Published on December 08, 2019
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