Opinion Onion lessons

Lasalgaon, Asia’s largest onion market, has seen a steady fall in the prices. (Express Photo)

The Centre’s decision to remove minimum export price (MEP) restrictions on onions is welcome, though the corrective comes late for a step that should not have been taken in the first place. Since early-November, with the new kharif/ late-kharif crop’s arrival, prices of the bulb have more than halved to Rs 950-1,000 per quintal in the wholesale mandis of Maharashtra. The Centre waited as long as December 11 to slash the MEP from $ 700 to $ 400 per tonne and, then, to zero on December 23. For farmers, who have already sold their onions, this is hardly any relief. Their plight is quite similar to what potato growers experienced in 2014-15. In potatoes, too, the MEP of $ 450 per tonne clamped on June 26, 2014, was removed only on February 19, 2015, when prices in mandis from Jalandhar to Farukhabad had already crashed to Rs 300-400 per quintal. They haven’t really recovered since; even today, when the main rabi crop is still to be harvested, prices are ruling at Rs 500-600 per quintal.

The Centre is always quick in imposing or hiking MEPs at the slightest indication of domestic prices firming up. That alacrity, however, is rarely seen when it comes to removal or reduction, which obviously works against growers: The latest decision on onions probably wouldn’t have happened but for farmers in Maharashtra’s Nashik region staging rasta rokos and not allowing auctions in market yards. But it also raises questions about the very effectiveness of export curbs. High prices — these scaled the Rs 5,500 per quintal level in the third week of August — induced farmers to expand onion acreage this time. The resultant bumper crop would, in the natural course, have brought down prices. What the ban on exports — an MEP of $ 700 per tonne or Rs 4,500 per quintal practically amounts to that — has done is to reduce realisations to the point where farmers are discouraged to plant onions. This could well impact prices in the coming year. The MEPs, if anything, have only caused collateral damage through the loss of valuable export markets.

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The time has come to review the utility of not just MEPs, but also other restrictions on movement, storage and marketing of agricultural produce. The last one year or more has unfortunately seen the Essential Commodities Act being invoked, especially in pulses and onions, to the extent of equating even normal trading and stocking operations with “hoarding”. Such measures are counterproductive, not least because they inhibit the supply response from farmers. That, ultimately, isn’t good for consumers, who are better served by producers than governments.