Business Desk, ETV Bharat: Onion prices spike in the country, time and again, mainly due to manipulation by middlemen and traders and not just because of climatic disruptions or supply side problems according to Dr. A. Narayanamoorthy, former member of the Commission for Agricultural Costs and Prices (CACP), an expert body which recommends minimum support prices (MSPs) to the government.
In a chat with ETV Bharat, Narayanamoorthy explained in detail the role of hoarders in the onion price game and the policy actions that can be taken to reduce their overall influence in the retail market.
Hoarding is the main challenge
Onion prices have jumped sharply in the last few weeks, hovering around Rs 100-110 per kg compared with Rs 20-30 levels in the first week of October, after heavy rainfall in parts of key onion-producing states like Maharashtra and Andhra Pradesh.
However, Narayanamoorthy believes climate variation has played only a small role in the surge of onion prices and it’s rather the hoarders that use excess rainfall as an opportunity to stock onions and artificially raise the prices.
“Climate-related reason is only about 30%, remaining 70% happens because of hoarding,” said Narayanamoorthy.
He added that there might be up to 20% reduction in overall supply in the yearly Kharif onion crop that usually arrives in October and November because of weather disruption, but that cannot lead to such a price rise.
“This all is happening because of brokers and pseudo farmers (brokers who call themselves farmers)…they stock the onions. And they wait for slightly excess rain or drought in any of the key regions and as soon as that happens, they stop sending the produce to the market (to create artificial scarcity),” he explained.
“Farmers are not earning any money at all. Even now when onion is being sold at Rs 110 per kg, they are still getting Rs 25.”
Citing an example, he said that from the Lasalgaon market (considered to be one of the largest onion markets in the country) to the Pune city, one can travel in three-and-a-half to four hours. But the price of the same quality of onion changes from a maximum Rs 44 per kg in Lasalgaon to Rs 110 per kg in Pune.
Modification in Essential Commodities Act not responsible
The Parliament in September passed the Essential Commodities (Amendment) Bill, 2020, which removed onions from the list of essential commodities, thereby giving farmers and traders the freedom to produce, hold, move, distribute and supply onions as per market dynamics.
However, Narayanamoorthy said that that has nothing to do with the recent increase in prices.
“Onion was removed from Essential Commodity Act only two months back, but we have had onion price hikes in 1980, 1988, 2010, 2013, 2015, 2019. This has been happening periodically,” he said.
“This has nothing to do with the farm bills. Farm bills are just formalising the agriculture market. And they have just been passed and not effectively implemented yet,” he added.
FPOs is the way forward
In order to keep the role of middlemen and traders in check, the government is now also focussing on the role of Farmer Producer Organizations (FPOs), said Narayanamoorthy.
“FPOs are made and managed by farmers and not traders. During the lockdown, they proved really helpful in states like Maharashtra. They procure onions at attractive rates and sell to consumers at reasonable profit. So it’s a win-win for both,” he said.
“In farm bills also, in one of the bills that deals with contract farming, these FPOs are promoted,” he added.
The government is giving more tax freedom to FPOs in order to support them; so that they can easily transport onions from one state to another, said Narayanamoorthy.
MSP for vegetables possible?
In order to support farmers, the Kerala government announced MSP for 16 varieties of vegetables in the last week of October, becoming the first state to do so.
Narayanamoorthy supported the move, but raised concerns on its implementation.
“Procurement, storing and retailing is a big task in horticulture crops since they are perishable. But it’s a good move as it will help both consumers and producers.”
“I support the move but I don’t know how effectively it will work,” he added.
