After tomatoes, it is onions that are threatening to turn the tide of low – actually negative — food inflation. On Thursday, the bulb was trading in Maharashtra’s Lasalgaon wholesale market at an average price of Rs 23 per kg. This was as against Rs 12.70 per kg just a day before which also saw the Reserve Bank of India cut its benchmark repo lending rate by 0.25 percentage points to 6 per cent. Like in the case of tomatoes, the spike in onion prices has been sudden.
Since February 2016, onions were selling in Lasalgaon at below Rs 10 per kg, averaging as low as Rs 4.50-5.50 only this May-June. The modal or most-quoted rate at the country’s largest market for the bulb was Rs 5.70 per kg even as late as July 17. On July 26, it crossed Rs 10 and has more than doubled since then.
The interesting part about the price spiral is that it has come despite Lasalgaon recording about 22,000 quintals of onion arrivals on Thursday, compared to 13,000 quintals in the preceding two days. Also, this happens to be the month of Shravan in the Hindu calendar when onion consumption is supposed to be low. The bulb was, in fact, quoting in the Delhi market at an average of only Rs 13.75 per kg today although official arrivals there were just 14,263 quintals.
Omprakash Ratanlal Raka, a Lasalgaon-based onion trader and exporter attributed the firming up of prices to drought in Karnataka which has reported 26 per cent deficient rainfall so far in the current monsoon season. “The fresh kharif crop from Karnataka normally starts arriving towards mid-August and peaks by the first week of September. This time, there are reports of a 50 per cent dip in onion acreage in the state and that is what is driving prices”, he said. In Bengaluru, too, onion prices rose from Rs 15.80 to Rs 20.20 per kg today.
“The sudden price jump is only a result of demand and supply factors. Traders expect that the demand for onions from North India will pick up once the Shravan month gets over after Raksha Bandhan which is August 7. On the other hand, with the drought in Karnataka, there isn’t going to be any immediate source of supply till about mid-September”, said Nanasaheb Patil, director of the agriculture produce market committee at Lasalgaon.
Karnataka produces around 2.7 million tonnes (mt) out of India’s total annual onion output of 20-21 mt, making it the third largest after Maharashtra (6.5 mt) and Madhya Pradesh (2.8 mt). Onions are grown mostly during the kharif season with sowing in June-August following the monsoon rains. This crop arrives first in Karnataka from mid-August and in Maharashtra after mid-September.
In Maharashtra, farmers also plant a late-kharif crop during September-October, which is harvested in December-January, and rabi onion that is sown in November-December and harvested over March-April. The rabi crop, which is also grown in parts of Madhya Pradesh and Gujarat, is amenable to storage. Maharashtra farmers store this crop in structures called “kanda chawl” to prevent moisture causing the bulbs to sprout or rot. The stored onions are what feed the markets right until end-August when the fresh Karnataka crop would have arrived.
Traders estimate that Maharashtra farmers would have stored some 1.8 mt of onions from the last rabi crop which they sell in a staggered way. The corresponding figures for MP and Gujarat are in about 1.2 mt and 0.4 mt respectively. “This time, most of them made heavy losses on the stored onions, as prices ruled rock-bottom. In MP, the state government was actually forced to buy over 0.8 mt at Rs 8/kg. The farmers who hadn’t yet sold are obviously making money now”, a trader pointed out.
The high prices should induce farmers to sow more area in the ongoing kharif season. Till date, Maharashtra has reported only around 10,000 hectares of onion planting, as against the normal 30,000 hectares during kharif. Sowing has been lower partly because of the main Nashik belt receiving torrential rains during July and also un-remunerative prices. That could change in the coming weeks, with both prices and the weather looking up.
“We hope the Centre will not take steps like export ban and imposing stockholding limits, as in 2014 and 2015. High domestic prices will automatically put a brake on exports. Moreover, should not the farmer be entitled to some price increase after almost one-and-a-half years of losses?” asked Patil. India, in 2016-17, shipped out 2.42 mt on onions valued at Rs 3,106.50 crore. During the previous financial year, these amounted to 1.38 mt and Rs 3,097.21 crore, respectively.