The speed with which the PMO reacted to the onion crisis was heartening. An EGOM was not set up,neither was the EACPM asked to deliberate. Exports were banned,imports allowed and subsidies brought in. When the sights are clear the Indian state reacts. It has to be accepted that onions are important together with dal,wheat,rice,chillies,sugar,milk and so on. Sharp price increases create consternation. Political and media reaction is typical,but a sense of proportion would help. Food inflation has been falling for many months. I know index numbers dont tell the story,and the housewife knows better,but The Financial Express regularly gives mandi rates. Wheat prices of around Rs 14 per kg have been reported consistently from Punjab,Haryana,central Uttar Pradesh bazaars,now also from Ahmedabad where prices a few years ago used to be double those in the north. The same with rice,at Rs 16 per kg. Potatoes are selling at Rs10 in Kolkata and Lucknow and we could go on with tur dal and so on. Prices of the levels common six months ago are not there any more. Yes onion prices are very high. While resenting that,the consumer knows that short-term weather-oriented price increases are not happening in a particular commodity for the first time in her memory.A few weeks earlier,farmers in Gujarat,which also grows onions,went protesting to the state and national capitals. They were growing with Sardar Sarovar water more wheat and rice,as cotton prices were perceived to be falling. No one gave them much attention. Now that the government relaxed the export ban,prices of cotton have improved. But why not earlier? In fact,why control export of cotton anyway? We know the corruption possibilities with discretionary quantitative controls,with all the shenanigans being reported. There is hoarding of onions,we are told. But of course,yes. Some of us never advocated completely free markets. We got that lecture. I and some others like-minded in the government always wanted a strategic presence for the state with rule-based intervention systems. When we present those in practical terms in policy reports,the government rejects them. When they do that I know enough economics to say,be fair. At the least be consistently practical within our own reasoning systems. The hoarder,who is blamed for making money,is not the villain of Hindi movies who beats his wife but a trader who makes money when he faces an inelastic supply curve. Whatever we may say,onion prices are not coming down in a significant manner in the next six weeks. But for the future let us have some semblance of a rule-based policy. Allow trade with variable tariff policies,an option that has been wrongly rejected over my head and those of all the sensible chairmen of the Commission for Agricultural Costs and Prices. Dont control exports. Let the tariffs take care of the difference between what the farmer should get and the unstable world price. Do try to intervene selectively to ride the cycle at home. In March,when I was lazily driving in Nashik and Ahmednagar districts,farmers were in disgust throwing onions on the road since the price was Rs 3 per kg. No newspaper was shedding tears. Above all,let us develop markets and help the guy who processes and stores.FDI and corporate in trade will not help much because,as some good studies at the IIMA show,they give the farmer a better price,which they were meant to. Is that inflation? Maybe not for there are quality factors. There are onions and onions. My paanwallah tells me that the imported variety is soft inside. A better statistical system will help.Today it is onions,tomorrow it may be something else. When 3 per cent agriculture growth rates hit the demands of a 9 per cent economy,something or the other will give. It will be tough to always blame the hoarder. Sensible policies automatically getting into play are better. But who says that good ideas always matter?
The writer,a former Union minister,is chairman,Institute
of Rural Management,Anand,express@expressindia.com
