Food prices edge up, government keeps close watch

Edible-oil prices continue to be dearer due to high global prices, prompting the Union government last week to tighten measures
On October 13, the Union government wrote to states to ensure prices of edible oils are brought down. (MINT_PRINT)
On October 13, the Union government wrote to states to ensure prices of edible oils are brought down. (MINT_PRINT)
Published on Oct 17, 2021 01:19 PM IST
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Vegetable prices, especially of tomato and onion, have risen in urban centres, including the national capital, on the back of higher fuel prices and damage to summer crops due to heavy rains, wholesale and retail trade data showed on Sunday.

Edible-oil prices continue to be dearer due to high global prices, prompting the Union government last week to tighten measures such as requiring traders to reveal stocks.

On October 13, the Union government wrote to states to ensure prices of edible oils are brought down after cuts in import duty until March 22.

The Union government has built a record reserve of 200,000 tonnes of onions to deal with potential spikes in onion prices during the current lean season.

Prices of some food items, where seasonality plays a big role, tend to be volatile. Onion is one of them. Its rates often stoke food inflation and knock the monthly budgets of consumers, poor or rich, because the vegetable is a base ingredient of most Indian dishes.

Past data shows onion prices usually tend to rise during September because the month marks the beginning of a nearly three-month lean season when stocks from previous crops deplete. Fresh harvests usually arrive in markets in the winter.

Tomato prices shot up to 60-65 a kg, while onions were selling for 50-55 per kg in Delhi, Patna, Kolkata and Mumbai, up from 20-25, price data from agricultural produce market committees showed.

Rains in Karnataka and Maharashtra have upended supply lines and damaged crops in key growing regions, said Arun Solanki of Nashik-based Solanki India Ltd, a major supplier of vegetables grown in Maharashtra.

“There is 10-15 increase in prices of these vegetables as supply has slowed. Back-end suppliers say this is because of heavy rains this summer,” SP Gupta of New Delhi’s Ghazipur wholesale vegetable and fruit market said.

Maharashtra, Karnataka and Andhra Pradesh are major onion-producing states, accounting for over 75% of total summer onion output. All of these states witnessed delays or damage to summer onion crops.

Price rise is a key determinant of monetary policies. Moderate inflation helps the Reserve Bank to keep interest rates low to spur economic activity, which has been hit by the pandemic.

“Onions, a staple in most Indian households, are likely to make consumers cry again with erratic monsoon leading to an eventual delay in harvest,” Crisil Ltd, a rating firm, said in a recent research note.

The Crisil Ltd’s “on-ground report” said onion seed transplantation suffered critical lags due to on-off rains during the June-September monsoon period, potentially delaying the time the onion crop takes to mature.

Summer onions account for no more than 30% of India’s annual supply but they are critical to price stability because they replenish supplies during the lean September-November period.

“The buffer size (of onions) has been enhanced from 5,137MT in 2017-18 to 100,000MT in 2020-21, which has been further enhanced to 200,000MT in 2021-22 to ensure a more effective intervention to control prices,” a government document reviewed by HT said.

The official cited above said on condition of anonymity that the government is “monitoring prices of all essential commodities as always”. If prices rise, the government hopes to step in by releasing onions “as and when needed” from its own reserves to keep rates stable, the official added.

Market watchers point to a familiar pattern in India’s onion-price spirals every alternate year or so.

In the first half of 2017, for instance, wholesale onion prices plunged, leading to widespread protests by farmers in Maharashtra and Madhya Pradesh. Then, in the second half of that year, when the government intervened in the markets to buy out excess stocks, prices began rising. In 2019 and 2020 too, retail rates soared past 90 a kg between September and November in many cities.

Onion trade in the country suffers from classic price volatility. This is caused mainly by supply-disrupting factors such as extreme weather, losses from inadequate or improper storage or frequently shifting production levels, all of which can cause supplies to go from surplus to scanty in a matter of weeks.

Experts hold that longer dry spells followed by short periods of heavy rainfall are tell-tale signs of a changing climate’s impact on the monsoon, which waters 60% of the country’s net-sown area.

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Saturday, November 27, 2021