two screaming headlines – one, national; and the other, international – grabbed eyeballs recently: (1) ‘Maharashtra farmer travels 70 km to sell 512 kg of onions; gets post-dated cheque for Rs 2:00 as profit’ and (2) ‘Onion shortage threatens a new chapter in world food crises’.
At deeper levels, this stark contrast in the market situations reflects cartelisation at the international level and criminal apathy and mismanagement at the national level. Even if we just scratch the surface, it is amply clear that at least the authorities in India should go beyond shedding crocodile tears for the marginal onion farmers.In December 2018, Sanjay Sathe, an onion farmer from Nasik district had donated Rs 1,064 to the Prime Minister’s Disaster Relief Fund. It was the amount he had earned after selling 750 kg of onions.Nothing has changed even after that striking protest.
At the international level, prices are skyrocketing, fuelling inflation, and requiring countries to take corrective action. Morocco, Kazakhstan, and Turkey have halted exports. The Philippines has ordered an investigation into cartels.Empty shelves have forced UK supermarkets to ration purchases of some fruit and vegetables, including onions,in view of weak harvests in Spain and North Africa.
At the global level, about 106 million metric tons are produced annually. The current surge in prices is a knock-on effect from disastrous floods in Pakistan, frosts damaging stockpiles in Central Asia and Russia’s war in Ukraine. In North Africa, farmers are reeling under severe droughts and an increase in the costs of seeds and fertilizers.Poor weather has hit Moroccan growers hard. In the Philippines, with prices of onions rising to incredible levels, flight attendants have been caught smuggling thehumble onion out of the Middle East!
In recent weeks, Kyrgyzstan, Uzbekistan, and Tajikistan (world’s top per-capita consumers of onions) have imposed export bans. Azerbaijan is limiting sales and Belarus will license shipments.
In India, the situation is quirky. Market watchers say prices of onions usually spiral during November, hurting home budgets. However, in November 2022, steady supplies caused prices to crash, hurting farmers.Wholesale rates in November dropped to their lowest level in a year at the Lasalgaon Agricultural Produce Market Committee, Asia’s largest trading hub for the commodity.
Onion rates often soar, driving up food inflation, despite cycles of gluts and scarcity mainly due to improper intervention by the government or sheer mismanagement by policymakers.Traders say the Union government has been releasing onions routinely from its buffer stock to keep retail prices ‘steady’. So, the fault lies in the timing of the stock releases.
In July 2022, the Centre procured through National Agricultural Cooperative Marketing Federation of India 2.50 lakh tons of onion for the buffer in 2022-23. The stocks were supposed to be released through targeted open market sales and offered to States/UTs as well as government agencies for supplies through retail outlets during the lean months (August-December) to moderate price rise. “Open market releases will be targeted towards states/cities where prices are increasing over the previous month and in key mandis to augment the overall availability,” it was claimed. Officials have messed with the so-called price stabilisation buffer.
In 2022, onion growers from Madhya Pradesh and Rajasthan increased their acreage, with growers from Maharashtra reporting highest-ever acreage, of 9.45 lakh hectares of the area under the bulb. India’s production stood at 311.29 lakh tonnes – a significant jump from last season’s 266.41 lakh tonnes. A major part of the production was from the Rabi or summer crop, which farmers harvest during March-April. Maharashtra onion farmers reported 35-40 lakh tonnes of storage.
Across wholesale markets in Nashik – the onion belt of Maharashtra -the kitchen staple was trading at around Rs 1,100-1,200/quintal in November. Prices dropped from Rs 1,437/quintal in March to Rs 9,33/quintal in May. It went up to Rs 1,205/quintal in July. The average price in November was Rs 1,136/quintal.
Today onion growers aver that the present price range does not even cover the cost of production for farmers. Unless the average price in the markets is around Rs 2,000/quintal, they cannot afford to sell their produce.
Amid headline shortage of onions at the global level; strangely, traders and exporters in India are talking about ‘lack of demand’ in the international markets. Their assessment is based on the dip in demand in traditional markets like the Gulf countries, Bangladesh, and Sri Lanka.
The headline case of the Maharashtra farmer,who had travelled 70km to sell 500 plus kgs of onions for a ‘profit’ of Rs 2:00, is attributed to a glut this time. The farmer, Rajendra Tukaram Chavan, hailing from Borgaon village of Barshi taluka in Solapur, who travelled all the way to the Solapur Agricultural Produce Market Committee (APMC),said he had spent almost Rs 40,000 to grow his produce.
Reflecting long-standing logistical and storage lacunae bedevilling the nation, the farmer earned just Rs 512 from the sale of his entire crop but the APMC trader deducted Rs 509.50 as transportation charges. He can encash the Rs 2 cheque he received only after 15 days. That is, digitisation has rubbed salt into his wounds.
The price fluctuations and instability in the domestic market are attributed to the Union government’s frequent changes in trading rules for onions. The rules in turn are linked to the Essential Commodities Act (ECA) and the Foreign Trade (Development Regulation) Act (FTDR) which give the government broad power to limit warehousing capacity and regulate the trade of commodities.
Investments in onion warehousing are poor; so, up to 40% of the stocks are usually lost due to poor storage conditions, hurting farmers and others in the supply chain. Lasalgaon’s onion farmers and traders have gone on record that ad hoc trade policy decisions have created market uncertainty and reduced the incomes of onion farmers across the country. Farmers are therefore forced to sell at prices as low as Re 1 per kg. There are also people who want it at a cheaper rate!
