Steady supply leads to crash in onion prices

Updated on Nov 25, 2022 05:16 AM IST

Prices of onions usually spiral during November, knocking household budgets. This year, however, steady supplies have caused prices to crash, hurting farmers, market data show

Traders say the government has been releasing onions routinely from its buffer stock to keep retail prices steady (FILE)
Traders say the government has been releasing onions routinely from its buffer stock to keep retail prices steady (FILE)

Prices of onions usually spiral during November, a lean month when availability dips, knocking household budgets. This year, however, steady supplies have caused prices to crash, hurting farmers, market data show.

Wholesale rates in November have dropped to their lowest level in a year at Lasalgaon agricultural produce market committee, Asia’s largest trading hub for the commodity.

Prices of some food items, where seasonality plays a big role, tend to be volatile. Onion is one of them. Its rates often soar, driving up food inflation. The vegetable is a base ingredient of most Indian dishes and there are alternate cycles of gluts and scarcity every other year.

Traders say the government has been releasing onions routinely from its buffer stock to keep retail prices steady. At Lasalgaon, the average quality onion is selling at a wholesale price of 10-15 a kg, while cost of cultivation comes to 22-25, said Bharat Dighole, president of the Maharashtra State Onion Growers’ Association, over the phone from Nashik.

“We have asked all member farmers to stop auctioning so that rates go up. Or else, we will go into distress selling,” Dighole said.

The Union government has built a record reserve of 250,000 tonne of onions for 2022-23 to deal with potential spikes in prices during the lean season that starts around August and lasts till December. The move is aimed at keeping a lid on food inflation.

Prices of onion are now nearly 4% cheaper at the retail level than last year, official data show, with all-India retail and wholesale prices averaging 42-44 kg and 37.06 kg respectively in Delhi in the first fortnight of November, according to data from the consumer affairs ministry.

The government is rapidly releasing quantities of onion from its own stocks to “non-producing states”, or regions that don’t produce the vegetable from a federally held reserve of 250,000 tonne for 2022-23, an official familiar with the matter said.

“The onion release from buffer stock will have two conditions. One, it will be only for non-producing states, such as those in the northeast. Two, buffer stock onion can’t be released in the vicinity of major onion markets. An initial quantity of 35,000 tonne has already been issued,” the official said.

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  • ABOUT THE AUTHOR

    Zia Haq reports on public policy, economy and agriculture. Particularly interested in development economics and growth theories.

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