For the Centre, onions have turned hot potato.
Wholesale prices of onions - the base ingredient for most Indian dishes - have shot up by more than a third over the past three months even as production and storage estimates point to adequate stocks, an indication that hoarding by traders could be taking place.
Hoarding refers to the trading behaviour of holding on to large quantities of stocks with the intent of pushing up prices.
Supplies in Lasalgaon near Nashik - Asia's largest wholesale onion market where prices around the country are set - started dipping in June and prices have since climbed steadily.
Average wholesale prices at Lasalgaon on Tuesday were Rs. 4,300 a quintal (100 kg), jumping 37% since Sunday and breaching an earlier record of Rs. 3,800 a quintal set on December 20, 2010. Retail prices have risen faster. Average retail prices stood at nearly Rs. 7,000 a quintal on Tuesday, compared with Rs. 3,000 in May.
"The main reason (for high prices) is low supplies. But our production and storage estimates point to adequate stocks. This is what we have told the Centre," RP Gupta, director of the Nashik-based National Horticultural Research and Development Foundation, said.
He added that a roughly 4% dip in output last year due to a partial drought in Gujarat and Karnataka was insignificant and could not have caused a large-scale scarcity.
The consumer affairs ministry is now reviewing the situation. The government could set a minimum price below which traders won't be allowed to export onions. This would make Indian onions expensive for foreign buyers and cheaper at home.
"In an election year, high onion prices can be worrisome. The BJP's loss in the 1998 Delhi assembly polls was attributed to a dramatic rise in prices.
India's onion trade is ridden with malpractices, according to some recent studies.
In December 2010, when prices peaked during the last major spike, a probe by India's statutory anti-monopoly agency, the Competition Commission of India, revealed that one firm accounted for nearly one-fifth of the total trading for that month.