Updated: October 24, 2020 7:11:49 am
At the APMC Market in Navi Mumbai on Friday. (Express photo: Narendra Vaskar)
With less than a week to go Bihar elections, the Center on Friday reintroduced the onion stock limit, a measure aimed at curbing rising prices, which crossed Rs 80 per kg in many cities on Friday, including nearly Rs 100 per kg in Mumbai.
Just a month ago, Parliament had amended the Essential Products Act of 1955 to exclude onions, as well as potatoes, edible oils, oilseeds and legumes, from the list of commodities, thus freeing them from the limits of stocks. Since then, possibly with the Bihar elections in mind, the government has acted twice to control onion prices; He relaxed import rules on Wednesday, followed by the reintroduction of the stock limit on Friday.
A look at the dynamics of onion prices and the impact of government intervention:
Why have onion prices gone up?
They have been on the rise since the last week of August, when reports of massive losses of kharif onions started coming in from heavy rains in northern Karnataka. This harvest was due to arrive after September and was expected to feed markets until the arrival of the Maharashtra kharif crop towards the end of October.
There are three main onion crops: kharif (sowing June to July, harvest after October), late kharif (sowing September, harvest after December), and rabi (sowing December to January, harvest after March). Rabi cultivation has the lowest moisture content, which makes it suitable for storage. Farmers, especially in Maharashtra, store it in structures in the field called kanda chawls to protect it from moisture and light. This crop feeds the markets until the next one arrives.
Heavy rains in September not only destroyed the new crop in Karnataka, but also affected onions stored in states like Madhya Pradesh and Gujarat. Only farmers in Maharashtra had marketable onions, having stored around 28 lakh tonnes at the beginning of the summer. But even Maharashtra farmers have, in fact, suffered more storage losses than usual: 50-60% versus 30-40% normally. Rain in the onion belt of Ahmednagar, Nashik and Pune had caused water to leak into the structures.
Also, agriculture officials say, the onion’s shelf life is shorter this year due to excessive use of urea by farmers. “Last year onion prices were good and farmers were more lenient with urea to increase yield. Unfortunately, this shortens the shelf life of the onions, ”said an official.
The national area of rabi onions last season was 10 lakh hectares compared to 7 lakh hectares in 2018-19. But the additional waste has limited the supply.
Of the 28 lakh tonnes stored in Maharashtra, there are around 10-11 lakh tonnes left now. Annual consumption of onions in India is forecast to be 160 lakh tonnes, Maharashtra alone consumes between 4,000 and 6,000 tonnes per day.
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How has the government reacted to this?
The Center applied the first brakes to the price hike on September 14, when it banned the export of onions. This was done when the 1955 amendment to the Essential Products Act took away the government’s power to put limits on stocks of onions and some other commodities. Stock limits have been a powerful weapon in controlling prices. But even after the export ban, prices continued to rise due to a mismatch between supply and demand. Last week, Pune income tax officials inspected the books of nine major merchants in Nashik.
This was followed by the relaxation of import rules on Wednesday, to allow easy shipping from Iran, Turkey and other onion-producing nations. In Mumbai, Vashi’s wholesale market sourced 600 tonnes of onions, which made their way to the South Indian markets.
And on Friday, the government reintroduced the stock cap. Wholesale traders can now store up to 25 tons of onion and retailers up to 2 tons. These limits were set after considering the year-on-year price increase. 📣 Follow Express explained on Telegram
Will imports help lower prices?
The cost of landing the onions from Iran at the Mumbai port is around Rs 35 per kg. Taking transport, handling and other charges into account, the final retail cost of such onions is approximately Rs 40-45 per kg. However, traders said Iran’s demand for onions is coming from the hotel and hospitality industry and not from the retail buyer. These onions, they point out, lack pungency and are larger than Indian ones.
In its statement, the Center has expressed its hope that the kharif harvest will reach the markets soon, which will help cool prices. However, reports of large crop losses have started pouring in from Nashik due to exceptionally heavy rains in recent days. Farmers say the rain has not only damaged the nearly market-ready crop, but has also affected nurseries where farmers were growing saplings for late kharif and rabi crops.
Given the damage to the harvest, market sources believe that the chances of the Maharashtra harvest arriving in the first week or two of November are slim. “Most of the time it will be delayed until the end of November,” said Suresh Deshmukh, a broker operating in the wholesale market in Dindori, MP.
While imports can cause prices to move lower in the short term, most say that the real price correction can occur only when the new crop hits the market. That will be only after November.
What are the prospects for the next harvest?
Farmers and agricultural officials have spoken of a severe onion seed shortage, which may cast a shadow over the all-important rabi season. Normally, farmers generate their own seeds by allowing a part of the crop to flourish and then produce seeds. However, this season, they skipped this step and sold their entire harvest in view of the good prices being offered. The lack of availability of good seeds has caused concern and available seeds are being sold at a premium.
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