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Onions to sting till March

delhi Updated: Dec 22, 2010 09:13 IST
Zia Haq

Retail prices of onions continued to remain high on Tuesday even as a ban on exports led to a 30% fall in wholesale rates. The government, however, cautioned that retail prices would fall from current exorbitant levels (of Rs 75-80 per kg) only after three weeks.

But prices are expected to return to the last month's reasonable levels (Rs 20-25 per kg) across the country only in March, when the rabi (winter) crop hits the market and eases the short supply caused by rain-induced crop losses.

A ban on onion exports eased prices at Maharashtra's Lasalgaon mandi, Asia's largest, which sets prices for the country, on Tuesday. But changes in wholesale prices usually take about three weeks before they are reflected at the retail level.

Across the country - in Mumbai, Chennai, Kolkata, Patna, Chandigarh and other cities - consumers complained of household budgets going awry as onions form the base ingredient for a majority of Indian meals.

High onion prices, which have contributed to the exit of at least two governments - at the Centre in 1980 and in Delhi in 1998 - forced an intervention from Prime Minister Manmohan Singh.

His office shot off a letter to the secretaries of the consumer affairs and agriculture departments expressing concern over the "extraordinary price rise" and calling for "urgent steps" to cool prices.

Unseasonal November rains in Maharashtra and Gujarat, which account for 20% of India's onion production, and the resultant damage to the crop have led to a demand-supply mismatch and the consequent price rise.

The rains - and a moisture-related plant disease that followed - damaged two crop cycles: the main kharif (summer) crop, which was ready for harvest, and the late summer crop, which had just been planted and was due to be reaped in January.

"The summer harvest accounts for just 15% of the total annual production, but it is critical because it comes at a time when onion stocks from previous harvests are fully exhausted," said RP Gupta, director of the Nashik-based National Horticultural Research and Development Foundation.

Experts said the damage to summer crop - pegged at around 30% - should not have caused retail prices to jump to Rs 80 per kg on the intervening night of December 19 and 20.

"There could have been a sudden rise in export demand on that day, causing traders to divert supplies meant for domestic markets," said NR Bhanumurthy, economist with the state-owned National Institute of Public Finance and Policy.

Primer on high onion prices