Rise in onion prices: A cooperative movement for veggies need of the hour

For over two months now, onion prices have been on the boil. While prices crossed the benchmark Rs 100 per kg in several parts of the country, touching Rs 150 per kg or more in some metropolitan cities on certain days, an over-cautious government had earlier swung into a fire-fighting mode to bring down the prices. It followed the usual pattern - first, enhancing the minimum export price to US$850 per tonne (the rate below which exports are not allowed), and when the prices still continued to climb, clamp a complete ban on exports. This was accompanied by reducing the stockholding limit for wholesalers and retailers, and a strict warning of a crackdown on hoarding. At the same time, a frenzied search was made for onion supplies from countries from where immediate imports could be allowed.

Placing an order for imports of 6,090 tonnes of onion from Egypt, another 11,000 tonnes from Turkey and finally directing the state-run MMTC to import one lakh tonne of onion, the government had even relaxed the fumigation norms at the time of imports against pests and diseases. While the supplies from Egypt have started to trickle in, most imports are unlikely to materialise before mid-January. Meanwhile, 110 trucks of onions arrived at the Attari border in Punjab from Afghanistan on Monday, and more are likely to follow in the days to come. There is no denying that the imports will certainly bring some psychological relief to the heated market sentiments prevailing, but it isn’t going to make much difference in offsetting the production shortfall. After all, the total imports contracted so far does not exceed 1.5-lakh tonnes, and considering that roughly 50,000 tonnes is the daily requirement, the imports will be enough for only three days of consumption.

Excessive rains in the two major onion growing states - Maharashtra and Karnataka – which produce around 50 per cent of the country’s onion requirement, resulted in a shortfall in production. After an initial round of dry spell, excessive rainfall followed coinciding with the harvest period. A delayed withdrawal of monsoon rains from Maharashtra and Karnataka added to farmers’ woes by affecting harvesting. According to news reports, at the time of harvesting that staggers from early October to early November, Maharashtra alone received 1.5 times the average rainfall. In Karnataka, roughly 45 per cent of the area under onion was hit by untimely rains at the time of harvest.

The unseasonal rains at the time of harvest, which many attribute to climate change, had pulled down the official production estimates by 18-lakh tonnes. This was enough to send the prices spiralling.

But as it normally happens, the trade is more than eager to take advantage of the supply demand gap, thereby driving the market prices up north. As a knee-jerk reaction, the Ministry of Consumer Affairs, Food and Public Distribution had first imposed a stock limit of 50 tonnes for wholesalers and 10 tonnes for the retailers to improve domestic supplies. It subsequently reduced the limit to 25 tonnes for wholesalers and 5 tonnes for retailers. And when the pressure from the retail trade grew, essentially from the organised retail, the stock holding limit for retailers was further reduced to 2 tonnes. The importers however were kept free from these norms for the imported stocks of onions. At the same time, there was a build up in the demand for putting an end to unnecessary harassment of traders. Last week, the Karnataka traders, and earlier Andhra Pradesh traders, had officially conveyed their resentment to the State governments seeking an immediate stop to raids by Vigilance and Enforcement officials.

This year, onion production has seen a drop by a quarter in productions but still this is no justification for prices to spiral out of reach of a common household when the higher prices have not translated into higher prices for farmers. While video of a Maharashtra farmer selling onions at about Rs 8 per kg had gone viral, farmers have remained more or less at the receiving end. In early December, wholesale prices did jump to Rs 60 to Rs 70 per kilo in Solapur APMC market but the benefit was largely reaped by traders who had hoarded the produce. In Karnataka, farmers say the best price they received was Rs 25 to Rs 30 per kg, with most of them getting not more than Rs 18-20 per kg. In Andhra Pradesh, some farmers claim they got a price of Rs 60 per kg for the late harvested crop but a majority ended with a price not exceeding Rs 30 per kg. Generally, the market prices remain low when farmers have something to sell. But when the prices begin to sky rocket, the traders make a windfall, selling onions they had already purchased from growers.

That the consumers finally paid a price three to four times more than the price at which the farmers were able to sell is a clear pointer to the well-oiled cartels that operate. Otherwise I see no reason why onions should cost Rs 120 a kilo when what the farmers received was less than Rs 30 a kilo. The government’s stern warning to wholesale and retail trade notwithstanding, the fact remains that when the going gets tough, politicians as well as industry associations jump in building pressure to go soft on the trade. Even way back in 2010, when retail prices for onions had increased from Rs 35 per kg to Rs 70 per kg, there was no plausible reason behind the price hike except for large scale hoarding. Interestingly, 2010 was a year when the supply was 20 per cent higher with an additional one million tonne high output. There was no supply constraint and yet the prices had ruled high. Subsequently, the spike in onion prices in 2011 and later in 2013 when prices shot up by 400 per cent against a production drop of barely 4 per cent, the unwarranted rise in prices was actually played out well by the onion cartels.

While it has become customary to issue warnings to hoarders, the fact remains successive governments have failed to tame the trade, both wholesale and retail. Instead much of the blame is shifted to the lack of adequate storage at the farm level. If only farmers could hold on to onion harvests for some weeks before the prices begin to rise, the argument is that farmers would not be forced to dispose off their produce at a low price. Like in Nov-Dec last year, farmers received a price as low as 30 paise a kilo and many farmers had dumped onions on the streets. Strangely, there was no hysterical media at that time drawing the nation’s attention to farmer’s plight as if the terrible economic hardship that farmers have to undergo is of no consequence. It is only when prices begin to firm up in the cities that the media begins to howl.

On an average, a household’s requirement for onions averages 5 kgs a month. Even if the family is buying onions at Rs 100 per kg, the monthly expenditure totals Rs 500. This is less than the surge price for Uber/Ola rides a millennial pays in a week for travelling to office. Those who justify media shouts on rising onion prices saying such extensive media coverage is required as high prices affects millions of poor strangely keep quiet when farmers are throwing onions onto the streets. So much so for their love for the poor.

Well, there is no denying that the government needs to provide support to farmers for building more storage capacity, but the problem is much beyond storage. If storage was the problem, I see no reason why onion growers in America, who have state-of-art storage facilities, are finding it difficult to sell. In Florida, farmers are not getting more than $ 2.50 for a three-pound bag, which is less than the cost of production. In fact, an American farmer tweeted the other day saying that the price she is getting this year is exactly the same price at which she sold onions 30 years back. No wonder, while it is the trade which exploits gullible onion farmers in India, it is the Supermarkets that fleece farmers in America. Mainline economists want market linked solution to the recurring onion crisis but fail to explain why the markets in America are unable to help onion growers.

Since the markets have failed to provide farmers with the rightful price, there is a dire need to bring in a price stabilisation fund for farmers. At present, there exists a Rs 500-crore price stabilisation fund that is primarily meant to subsidise onion sales for the consumers. In addition to creating a mechanism to meet price fall for the producers, the need is to adopt a cooperative structure for tomato-potato-onion (TOP) production and marketing on the pattern of Amul cooperative. The Milk Man, the late Dr Verghese Kurien, had in fact planned Mother Dairy outlets for vegetables on the lines of milk cooperatives. It is time to reclaim the space, and usher in a cooperative movement for vegetables. That’s the only way to get a respite from the volatility in prices, both for the producers and the consumers.