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Of Onion Cartels & Skyrocketing Prices

 

With the first batch of imported Egyptian Onions entering the Indian wholesale market, Onion prices are finally breathing a sigh of relief. Wholesale prices saw a significant dip down by nearly Rs 10 per kilogram. But it is an open secret that this is only an ad hoc measure, a temporary solution and the problem is nowhere gone. It is almost the same scenario for the past couple of years. We always see prices soaring to near Rs 100/kg levels and then sustaining at those elevated levels for a while and then stabilising and dropping down to normal accepted levels through the year.

The cardinal question at this point is why does this annual skyrocketing of prices happen and how can you really find a permanent solution? Can we blame insufficient rains and supply-demand mismatch alone? Well some number crunching seems to tell a different story.

The average demand for onion in the country totals to about 17 million tonne and the average onion production hovers around 19 million tonne. Last year, i.e. 2014-2015 saw output at 18.9 million tonne compared 19.4 million tonne and Maharashtra is the primary producer and retailer of this key crop. However these numbers clearly signal that India is self sufficient in terms of onion production. So why do we need to grapple with shortage?

It is pertinent at this point to take into account that even the honourable Food Minister indicated hoarding as one of the primary reasons for the sharp shoot-up in prices.  State Governments have been advised by the Centre to come down hard on the hoarders. But these are all time consuming measures just like curbing export or organising imports are and also result in additional expenses.

Perhaps it is time the Govt looked at long-term measures like organising

  • Superior storage facilities to eliminate the role of middle men
  • Direct selling/buying facilities for producers/retailers
  • Organise a PDS kind of set-up or Direct benefit transfer for farmers if they sell directly
  • Limit the role of traders in dictating prices
  • Constructive steps to alleviate multi-level corruption

It is only then that we can look at the long-term redressal mechanism for the common man as well as the penniless producer who hardly enjoy the benefit of the elevated prices. Artificial hiking of prices also spells bad news for the economy and inflationary concerns.

 

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