Delhi first to get cheap govt onions at ₹25 per kg

On August 19, the government also levied a 40% duty on exports of onions, a move aimed at boosting local supply

The Union government on Monday started selling onions to consumers at a subsidized rate of ₹25 a kg, starting with Delhi, to stave off an inflationary spell amid rising prices of the vegetable.

Farmers are reporting damage to stored onions because of heavy rain over the past month, which has put pressure on supplies. (HT Archive)

The move is aimed at stemming runaway inflation in vegetables, which rose 37% in July, pinching household budgets; the government stepped in to sell tomatoes at a discount last month amid rising prices of that vegetable. But even as tomato prices appear to be easing, those of another vegetable, onion, are rising.

On August 11, the Union government announced it would sell onions from state-owned reserves to traders and bulk buyers to replenish markets. Nearly 1400 tonnes of onions have been dispatched to the targeted markets so far. On August 19, the government also levied a 40% duty on exports of onions, a move aimed at boosting local supply.

Most analysts see the current price spiral in vegetables as seasonal and transient. Some economists have warned that stubbornly-high food prices could cause inflation to become sticky. Consumer inflation in July raced to a 15-month high of 7.44%, according to official data. In addition to vegetables, the surge is also driven by cereals, which saw an inflation of 13% in July, the 12th straight month of double-digit inflation in staples.

In a key policy move that will allow authorities to boost supplies of onion during price spirals, the Union government has also decided to increase its onion stockpiles to 500,000 tonne this year, after having achieved its initial procurement target of 300,000 metric tonnes, a statement from the consumer affairs department said.

The department of consumer affairs has directed NCCF and NAFED, two state-backed food agencies, to procure 100,000 tonnes each to achieve the additional procurement target, alongside “calibrated disposal of the procured stocks in major consumption centres”, consumer affairs secretary Rohit Kumar Singh said.

Onion supplies are tightening in some markets and the kitchen staple could soon see an inflationary spell due an annual lean season when stocks dip, wholesalers and analysts have said. Indian consumers are highly sensitive to a rise in the prices of onions relative to other groceries.

“Inflation in food can stoke broader inflation, which can become entrenched because it can spill over to non-food items,” said Abhishek Agrawal, an economist with Comtrade.

Unlike in tomatoes or most greens, whose elevated prices have pinched household budgets, in the case of onions, the government maintains nearly 300,000 tonnes of reserves. It can therefore intervene in markets to cool prices by releasing onion stocks when supplies show signs of bottoming out.

Aside from releasing onions in major markets, which is under way, onions from the state-owned buffer stocks are also being made available to retail consumers at a subsidized rate of ₹25 a kg through retail outlets and mobile food vans of the National Cooperative Consumers Federation of India Ltd, a state-back food agency.

Farmers are reporting damage to stored onions because of heavy rain over the past month, which has put pressure on supplies, according to Narendra Wadhwane, the secretary of Lasalgoan agricultural market committee, Asia’s largest onion market in Maharashtra. Retail sales of onion from government stocks will be augmented in coming days by involving other agencies and also involving e-commerce platforms, a government official said.