Maharashtra grows 26 percent of India’s onions, followed by Karnataka (19), Gujarat (9); Rajasthan, Madhya Pradesh and Bihar about 8 percent each. From July to December, the produce comes from Maharashtra and Karnataka. October to March from Rajasthan. January to July from Gujarat and MP. The onion crop takes 60-90 days to mature. Farmers harvest depending on prices. If the price is high, in two months; else they wait till the third month ends.
Traders step into the chain even before the harvest. In certain places, they give farmers advances against produce; this helps them control the prices and gives farmers an assurance. Traders are networked across cities. The biggest exporters are in the biggest market: Nashik. Members of agricultural produce marketing committees are usually linked to political parties. This nexus is often blamed for lack of action against hoarders and black marketeers.
NAFED is a marketing federation that watches the market to protect farmers and consumers. One way is through controlling exports. Along with 11 state trading corporations, it sets minimum exports prices through the Price Fixation Advisory Committee; exports are encouraged in a glut, discouraged in a lean period. Till September, it kept the export price low and hiked them after the rains. But its reading of the market went wrong this time. And how.
TWO MONTHS ago, everybody was expecting a bumper crop of onions. Unseasonal rains in late September and October destroyed the crop. Yet, government agencies allowed traders to export 1.33 lakh tonnes in October. By the time the minimum export price was hiked to stop exports in November, the damage had already been done.
“People were expecting a good crop. Nobody wanted to hold on to stocks, fearing dropping prices,” says Planning Commission member Abhijeet Sen. Department of Consumer Affairs secretary Rajiv Agarwal adds, “We can’t have a pricing policy that keeps the prices so low that it hits the farmers.”
Besides, floods in Pakistan had destroyed the crops and the demand there was high. It looked like a good way to divert excess produce. Only, the excess produce just didn’t come through.
Was it too late before exports were curbed? “No, I don’t think it was too late,” says NAFED managing director Sanjeev Chopra. “There was no sudden transformation for this unprecedented rise in prices of onions. Nobody can explain, there was no report of major damage.”
Chopra puts the price hike down to panic created by the media. “On 17 November, two journalists came to see me. I explained to them the production scenario of onions. The media reported the next day that onion prices might rise to Rs. 100 a kg. I must say, the media should be more responsible.”
The damage wasn’t that insignificant, going by consolidated numbers that came in on 23 December. In Maharashtra and Karnataka, it was estimated at 40 percent: in other major onion growing states of Gujarat, Rajasthan and Madhya Pradesh, it was 15-20 percent.
Union agriculture minister Sharad Pawar — as also onion traders — put the price rise squarely down to supply shortage due to damaged crops. But that would explain only a gradual increase in prices as supply wore thin. That did not happen. Prices spiked suddenly in the third week of December. Which indicates hoarding by traders to create an artificial gap and jack up prices.
“It is a well-known fact that traders in Nashik (India’s biggest onion market) work in a cartel,” says I Haq, former chairman of the Commission on Agricultural Costs and Prices. Looking at the sudden price fluctuation, Haq suspects market manipulation by big market players.
A besieged UPA government finds itself at the receiving end of additional pressure. A day after Prime Minister Manmohan Singh wrote to Pawar to take all necessary steps, the wholesale prices were dropping; Delhi’s Azadpur mandi sold onions at Rs. 30-40 per kg on 23 December. Black marketeers have a tough time hoarding the monsoon crop; its moisture content is high, and it cannot be stored for more than two weeks (winter and summer crops can last up to six months in storage due to lower moisture).
But the retail prices were still high. Agarwal says the highest prices were reported in Delhi ( Rs. 64 per kg), Thiruvananthapuram ( Rs. 72 per kg), and Tiruchirapalli ( Rs. 75 per kg). The average retail price across the country was Rs. 50 per kg.