Onion growers have reason to be angry about the Centre imposing a 40 per cent export duty on onions. Farmers of onion, potato and tomato — unlike rice, wheat, sugarcane or even cotton and some pulses — do not benefit from any MSP-based procurement by government agencies. These farmers are entirely at the mercy of market forces. In April-May, when the new rabi onion crop was being marketed, wholesale prices in Maharashtra and Madhya Pradesh were averaging Rs 5-7 per kg, barely covering cultivation costs. Not many, whether in the Centre or the states, showed much concern then. But when prices at Maharashtra’s Lasalgaon mandi crossed Rs 20/kg towards mid-August — and Rs 30 at an all-India retail level — the antennas went up, culminating in the August 19 decision virtually banning exports.
Most farmers growing rabi onions don’t sell their entire crop immediately after harvesting. They, instead, stock it in “kanda chawls” —simple raised-platform storage structures to prevent moisture ingress and sprouting — for making staggered sales till September-October, before the next kharif crop. Higher realisations in the off-season help them recoup their losses from the earlier low-price sales. This time, unseasonal excess rains in March-April caused damage to a significant part of the harvested onions, making them less amenable to storage. Thus, not only did a lower quantity of the bulb get stored, farmers had to also make distress sales of the onions prone to rapid quality deterioration. It explains both the price crash in April-May and the apparent spike from around the second week of this month. By cutting off exports, the Centre has sought to ensure that the reduced quantity of the stored rabi onions remains within the country, so as to not exacerbate a domestic shortage.
But this extremely short-sighted move has left a bad taste in the mouth of growers: The government does nothing when prices are low, but goes all out the moment they start rising. Offering to procure a paltry 2 lakh tonnes — not even a tenth of the country’s onion exports — at Rs 24.1/kg is unlikely to change that perception. Secondly, all the recent government actions, from export bans to imposition of stock limits, make a mockery of the farm reform laws sought to be enacted hardly three years ago. They have not merely been repealed in letter, but now undermined in spirit by the same government. Finally, export prohibitions, whether on white rice, wheat or onion, threaten to erode India’s credibility as a reliable global supplier. Restoring that will be an uphill task.
