The government had on Monday increased the minimum export price of onion by a sharp US $175 per tonne to US $475 a tonne. A day earlier,it had announced that it would sell onions at Rs 20 per kg through retail outlets of NAFED and NCCF in Delhi from September 12.
Both the moves have been prompted by a surge in domestic retail prices of a vegetable that remains a kitchen staple as well as a political hot potato. With erratic rains affecting the cultivation of the kharif crop,and traders holding on to stocks in expectation of a rise in prices,the government has acted to pre-empt a situation like last year when prices had gone up briefly to Rs 80 a kilo.
The fear of a fall in kharif output has created the recent spurt in prices despite the fact that government estimates a better onion yield of over 15 million tonnes this year against last years 14.6 million tonnes.
In the last one-and-a-half months,onion prices have gone up by Rs 10 per kg and it is being sold at Rs 25 per kg in the national capital. On an annual basis for the week ended August 20,onion prices jumped by over 57 per cent in the wholesale price index. This is believed to have significantly contributed to food inflation,which crossed double digits (10.05 per cent) mark after five months.
Estimates suggest a shortfall of about 13 lakh tonnes of onion in the ongoing kharif season as compared to last kharif, Food Minister KV Thomas told The Indian Express. While the kharif onions last year stood at about 47.32 lakh tonnes,this kharif yield is estimated at about 33.67 lakh tones.
At the beginning of this month,onion prices in wholesale markets were around Rs 1,100 per quintal (Rs 11 per kilo) following erratic rainfall in three top onion-growing states Maharashtra,Karnataka and Gujarat resulting in late sowing. The kharif yield is expected to be 15 to 20 per cent less than last year in Maharashtra and Gujarat,and 50 per cent less in Karnataka.
The onions currently available in the markets are those harvested and stored during the rabi season last summer (April-May 2011). The rabi crop can be stored for over six months (unlike the kharif and late kharif crops that are highly perishable),and the traders as well as farmers who have stored it are controlling the supply with an eye on the prices. They will continue to release the stocks slowly,expecting higher returns as the situation worsens.
By mid-November,the stocks of rabi onions would exhaust,and the fresh kharif onions would be expected to ensure onward supply. However,considering the expected low yield of kharif harvest due to inclement weather,the situation may worsen.
The parallels with last year are obvious. At the beginning of September last year,onion prices in the wholesale markets were around the same,Rs 1,000 per quintal (Rs 10 per kilo). The stocks of rabi onions harvested during the summer of 2010 were depleting,like now. The crisis came when the kharif crop failed because of erratic rains,creating a scarcity. By December,prices were up to Rs 3,500 per quintal (Rs 35 per kilo) in the wholesale markets.
The government that time woke up late,declaring a ban on export of onions only on December 21,to ensure adequate supply in the domestic markets to control the prices. The ban continued till February 17,2011.
However,even the export ban hadnt helped much because traders had already exported their quality onions and the highly perishable kharif crop that remained couldnt be stored for long. Finally,the government had permitted import of onions to ease the situation.
The warning signs are clear this year,and everybody is waiting to see if the government actions prove timely and adequate. Out of about 28 lakh tonnes of onions stored by traders and farmers (last summer),about 45 per cent has been consumed by now, a senior agriculture official said. The remaining stocks can ensure supply till mid-November… but the problem is that the next crop,which,under normal circumstances,ensures smooth supply November onwards,will not be adequate.
Sources said a committee of secretaries had recommended a temporary ban on onion exports. However,Minister Thomas said they were opposed to such a ban,preferring to go in instead for an increase in minimum export price to discourage outbound shipments.
Exports are estimated to be to the tune of 5-8 lakh tonnes. The Agriculture Ministry is not in support of a ban, Thomas said.
He had discussed the matter with Finance Minister Pranab Mukherjee,Agriculture Minister Sharad Pawar and Commerce Minister Anand Sharma,he added. Pawar is expected to meet growers and traders from key onion-producing regions in a couple of days to analyse the situation.
Thomas is hopeful that rabi onions from Rajasthan would help meet a substantial part of the current shortfall. The 2010-11 rabi was a good harvest,when the onion output stood at about 84 lakh tonnes. There are carryover stocks from last rabi,which can help ease the situation. We will be able to manage it, Thomas asserted.
Hopes also rest on the late kharif crop,that arrives in January-February. Following the recent heavy rains,it is expected,this crop will be good.
Why onions matter
Onions are widely used across almost all households in India. Consequently,any increase in prices affects all,and can play costly for any ruling government. During 1998,adverse weather conditions had affected kharif onions,pushing prices up to Rs 20 per kilo in the wholesale markets,resulting in onions being sold for up to Rs 50 per kilo in the retail markets of Mumbai and Delhi. The defeat of the BJP in polls in four states was partly attributed to this. The annual onion production then had plummeted from 42 lakh tonnes to 36 lakh tonnes. Since 1998,onion production has been increasing in the country.
Maharashtra tops in onion production,followed by Karnataka and Gujarat. According to official estimates,the production of onions during the kharif season would be 15 to 20 per cent less in Maharashtra and Gujarat following erratic rains and late sowing,while it will be around 50 per cent less than last year in Karnataka. However,kharif prospects are good in some other states like MP,Rajasthan and Bihar.
The kharif (monsoon) onions are sown during May-June and harvested during September-December. The rabi (summer) onions are sown during October-November and harvested during April-May. About 60 per cent of onions are grown during the rabi season and they can be stored for six months from April-May to September-October. Kharif onions are highly perishable. If the kharif crop fails,there is scarcity till the next rabi crop is harvested. A few states grow onions by sowing during August-September and harvesting in January-March. This crop fills the gap.