India’s inflation battle often runs through the country’s onion markets, which are ridden with malpractices, helping traders push prices up on the slightest pretext, three recent probes suggest.
According to the commerce ministry, the wholesale price of onions rose by 114% since June 2012.
There are many reasons behind the wild swings in prices.
During the June-September monsoon months, vegetable prices usually remain high due to rain-related supply disruptions.
However, rampant malpractices help traders take advantage of such situations. Recent studies show evidence of monopolistic practices in Lasalgaon, Asia’s largest onion market near Nashik in Maharashtra.
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 (CCI), revealed that one firm accounted for nearly one-fifth of the total trading that month.
A 2012 report by the National Council of Applied Economic Research identified ‘collusion’ as a major hurdle in fair trade, with a handful of traders monopolising almost all big markets.
India’s onion trade is commission-based. Licences for all intermediaries — from commission agent, wholesaler, transporter, storage chain owner, and even the railway agent — are often held by the same business families.
After its probe, the CCI in April 2014 issued a split verdict, citing insufficient evidence to penalise traders, but ordered a study by the Institute for Social and Economic Change (ISEC) in Bangalore, which then found evidence of major malpractices.
The ISEC probe surveyed 11 markets. “The average experience of commission agents and wholesalers in onion trade in selected markets is found to be around 20 years… This creates oligopoly-like situation in the market,” the probe said.