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Journalism of Courage
The current price surge is seasonal. Long-term solutions include reform of APMC Act,more processing.
Given the 12 per cent contraction in onion acreage the last rabi,it isnt surprising that onion prices have risen,more so since the heavy rains have delayed the next crop. Indeed,given the nature of the crop,the stocks-to-use ratio is probably the lowest in these months. So it is not surprising that even the smallest news of crop delays sends prices spiralling. But the problem is not restricted to onions,there is a steep rise in all vegetable prices. Normally,higher prices should lead to a higher supply response. That hasnt happened in full measure for two reasons. First,thanks to state governments insisting that all trade has to take place through trader-controlled mandis,the farmer doesnt get too much of the increased price. Two,thanks to the near-complete lack of efficient storage facilities,all that an increased supply response does is dramatically lower prices till farmers are dumping onions on the highways as there are no takers.
Related to this is the issue of processing of fruits and vegetables. It is worth keeping in mind that while wholesale food inflation rose 18.8 per cent in September over that a year ago,that in manufactured food articles rose by a much lower 1.6 per cent. Since the basket of articles in fresh and processed foods is different,a one-to-one correlation does not exist,but some broad points can be made. Milk inflation in September was 5.8 per cent over that a year ago,but that in powdered milk was minus 0.17 per cent,while it was 0.95 per cent in ghee and 3.74 per cent in butter. Similar differentials can be seen in the case of fish and meats. Why such simple steps havent been taken over the years defies logic.
