Onion imports making up just a small fraction of shortfall as prices surge
This year’s onion crisis is rooted in a supply crunch triggered first by a sluggish start to the monsoon and then delayed harvests due to heavy rains in August in central Indian states.Updated: Dec 05, 2019 05:47 IST
The government is scouring markets in West Asia and Europe for onions, but has been able to import just a fraction of what the country needs, prolonging the worst price spiral since the 2010 crisis.
On November 22, the government contracted 6,090 tonnes of shipments from Egypt. These consignments are expected to begin arriving around December 10. On November 29, 11,000 tonne were contracted from Turkey and are expected to begin landing in January. Contracts for an additional 4,000 tonne from Turkey have been signed, a statement said on Wednesday. This shipment is expected to arrive by mid-January. Total shipments contracted for import so far stand at 21,090 tonne.
The current shortfall, however, is far larger at 160,000 metric tonne, according to a comparison of arrival figures for the vegetable in wholesale markets during October-November from a year-ago period from the National Horticulture Development Board (NHDB) database.
Retail prices spurted to their seasonal peak on Wednesday. The base ingredient of most Indian dishes was costliest, at Rs 200 a kg, in some markets of Vijayawada and Rs 140 a kg in Mumbai, according to price data from the NHDB. Onions retailed for Rs 130 a kg in Kolkata, Rs 120 in Chennai and Rs 130 in Bengaluru. In Delhi, onions sold for Rs 90 a kg on Wednesday, the data showed.
A drought in 2009-10, the severest in three decades, crimped output, leading to a similar rise in prices. This year’s crisis is rooted in a supply crunch triggered first by a sluggish start to the monsoon and then delayed harvests due to heavy rains in August in central Indian states.
India’s retail inflation rose to a 16-month high in October, at 4.62% against a 3.99% rise in September, mainly on account of a spike in vegetable prices due to unseasonal rains. “Our assessment is that rains have destroyed about 30% of the crop in Maharahstra,” said Shirish Jamdade, a horticulture official from India’s largest onion grower.
According to an interministerial panel headed by the home ministry to monitor stocks, prices and imports, extreme weather has damaged 26% of the main onion summer crop nationally. Onion cultivation is concentrated in states such as Maharashtra, Karnataka, Andhra Pradesh and Madhya Pradesh, regions which witnessed several spells of flooding.
The Union government has authorised the state-run Metals and Minerals Trading Corporation to import onions, but so far only about 1,600 metric tonnes have arrived at Jawaharlal Nehru Port. The imported onions, which are of a less pungent variety, have found few bulk buyers despite being offered at a third of the imported price of ₹45 a kg, an official said.
Wild swings in onion prices have now become fairly entrenched. Every alternate year, there is at least one price spiral. Given their political significance, onion prices are emblematic of India’s larger food-inflation battle. Just between January and May this year, farmers faced huge losses when onions sold for a wholesale rate of ₹5-6 a kg at Lasalgoan, Asia’s largest onion market in Maharashtra, against an average cost of cultivation of ₹9.
Rural food inflation rose to 6.42% in October against 3.22% in the previous month, while urban food inflation climbed 10.47% in October against 8.76% in September.
The next harvest, known as late kharif, will begin to hit the markets from January onwards. Some experts fear a glut then. “Till then, of course, prices will remain under pressure,” said Ashish Gupta of Comtrade, a commodity trading firm.
According to economist Ashok Gulati, alternating glut-shortage cycles in onions need a multi-dimensional fix. Investment in cold chains and adequate food-processing facilities can help tide over crises with dehydrated, stored onions. Price stabilisation requires a fine-tuned policy whereby the government can efficiently buy out excess stocks from the main winter crop, the largest harvest, and release them during summer shortages.
The government took more administrative steps Wednesday, mainly to ease imports. “Fumigation condition relaxations that were earlier provided till 30th November, 2019 have now been extended till 31st December, 2019. This is expected to further increase participation, competition and reduce price,” a statement said.