Shedding ‘Onion’ Tears

Onions: Rs 50 a Kilo


Who to believe—a farm scientist or a top bureaucrat? One says a serious shortage of onions is looming large. The other insists that there is "sufficient supply" and there is no justification for shedding onion tears.

In the marketplace the stark reality is this—The Onion Price Index soared by 72 percent during the last seven days. This is the second successive rise because in the previous week the Index has gone up 65 percent.

News from mandis in various parts of the country reflects and confirms a sharp uptrend. Chennai—Onions selling for Rs 30 to Rs 35 per kilo in August as against Rs 10 to Rs 15 in July. Hyderabad—Rs 40 a kilo compared to Rs 15 just a week earlier. Kolkata—Rs 50 a kilo compared to Rs 28 in July. Nashik-Pune—a 70 percent jump from Rs 15 to Rs 26 per kilo (the highest in 24 months).

Dr P K Gupta, the acting Director of the National Horticultural Research and Development Foundation (NHRDF), also confirms it and gives the reason. Acreage of kharif onion has come down by one third this monsoon because of rain havoc in major growing states like Maharashtra and Gujarat and poor rains in Karnataka, he says.

As a result, fall in total output is inevitable. Also, traders are diverting whatever onion they procure to markets where there is high demand, like Delhi and Bombay. This automatically heightens shortage in other centres in East and South.

But top bureaucrat Shobhana K Pattanayak paints a different picture. He is the Union Agriculture Secretary. On Monday, he said: "No fall in kharif output of onion is likely. Only a few States are affected, like Karnataka where production has been hit due to poor rains. The onion crop in most of the other States is in good condition".

The Secretary is conscious that onion prices are a politically sensitive topic. Governments have fallen in the past due to soaring onion prices. He makes it a point to issue a reassurance—that there is "sufficient supply of onion to meet the domestic demand till September".

Only till September? No, no, even right now it is not a panic situation. "We are closely watching the prices. No doubt in some wholesale markets, prices are in the range of Rs 20 to 22 per kg. It is slightly higher than usual. But I don't think this rise will remain for long. It is just a temporary phenomenon. Prices will see correction very soon".

What will happen next month? Will stocks run out? Very unlikely, says Pattanayak, a 1982 batch IAS officer from Karnataka cadre, "I am confident the supply will improve from next month when the crop from states like Andhra Pradesh will start arriving at the mandis".

In fact, he adds, reports are coming in that in some States early sown kharif onion is already being harvested and this will surely improve supplies and cool down prices in coming days. Besides, availability of some local onion in Rajasthan will also improve the supply.

But what about the skyrocketing prices this week in Nashik and Lasalgoan in Maharasthra, the country's leading producer of the bulb crop? Is that not happening for real? Is it just manipulation by unscrupulous big wholesalers?

Government is seized of the situation, says the Agriculture Secretary. 'That is why we have announced plans to import onions. The very announcement has had a salutary effect on traders and they are no longer inflating the rates'.

But how do you explain the sharp 0.86 rise in the Agri Commodities Index for the week ended August 12, which clearly indicates onion prices have surged higher for the second straight week?

Pattanayak has a ready answer. That is why I am saying it is a temporary phenomenon. 'I am not saying prices have not gone up in the last two weeks. I am saying Government is monitoring the situation and taking appropriate steps to ensure that things will come back to normalcy in the coming days'.

The official data released by the Government on Monday, however, confirms that right at this point of time, there is an uptrend, not just regarding onions, but across all commodities.

The data shows an inflationary trend during the first month after GST rollout. The Wholesale Price Index has risen to 1.88 percent in July as prices of some commodities increased. In comparison, in June the Index was 0.90 percent and in 2016 July it was 0.63 percent.

Prices of food articles went up by 2.15 percent in July on a yearly basis. In June, the prices had actually contracted and fallen by 3.47 percent.

In particular, Vegetable prices which had witnessed an astounding 21.16 percent contraction in June, shot up by an even more shocking 21.95 percent in July. This is the first time in four months that prices have gone up instead of down.

Industry chambers were quick to comment on the rise. But predictably they have utilized the opportunity to lobby for lowering interest rates for the manufacturing sector.

FICCI said: "Wholesale based prices have edged up in the month of July on the back of sharp increase in vegetable prices".

Having said that, it went on to plug its own line: "Given the trend and outlook for inflation, we see clear space for a more accommodative stance in the monetary policy".

It added: "This is all the more important given the state of industrial sector where growth is anaemic. The latest Index of Industrial Production numbers indicate a fall in manufacturing activity".

And further argued: "Private sector investments continue to remain weak and this is a key concern. We look forward to a further cut in the policy rate by the RBI at the earliest".

Assocham reacted in a more roundabout manner. It said: "Timely policy measures, including strategic imports, by the Government would ensure some abatement in the prices of pulses, potato and onion. Policy makers should also check and address prices of products which are still at higher levels such as paddy and sugar".

It added: "At the same time, rise in prices of crude oil globally have to be taken into consideration by policy makers since it may have impact on import bills and also exchange rates. This may have negative impact on input prices for the industry which has already started to feel the pressure on its profitability".

Meanwhile, latest data released by the Central Statistics Office (CSO) has confirmed what ordinary citizens already know—that retail inflation is going up. The Consumer Price Index rose to 2.36 percent in July against 1.46 percent the previous month. The reason? Vegetable prices have soared. CSO figures show that vegetable prices rose 3.57 percent in July in contrast to a contraction of 16.53 percent in June.

Vol. 50, No.11, Sep 17 - 23, 2017