Rain, delayed harvest push up onion prices

New Delhi The price of onions has increased sharply in several cities this week, despite the government’s ban on exports imposed last month, as a rain-induced delay in the ongoing summer harvests exacerbated supplies.

On Monday, wholesale rates in Lasalgaon, Asia’s largest onion trading hub in Maharahstra’s Nashik, shot up to Rs 6,200 a quintal (100 kg) for some varieties, from Rs 4,700 on Thursday, the last trading day of last week, said Prakash Kumawat, an official of the Lasalgaon agriculture produce market committee (APMC).

Consequently, retail prices in cities such as Pune, Guwahati and Patna rose to Rs 70, Rs 65 and Rs 60 per kg respectively, up from last week’s prices of Rs 40 to Rs 50, according to market data on Monday.

“Rains over the past week in Nashik and Malegaon in Maharashtra and parts of Telangana and Andhra Pradesh have either damaged crops or delayed harvests,” said Sudin Tarle, another official at the Lasalgaon wholesale market.

Since the bulb is a common base ingredient of most Indian dishes, and therefore widely consumed, consumers are quite sensitive to a rise in onion prices as compared to many other commodities.

Analysts point to a familiar pattern in India’s onion-price spirals. Retail rates soar every alternate year or so, usually at this time of the year. It’s not uncommon for prices to crash either.

Onion trade in the country suffers from classic price volatility, a term used for regular patterns of wild swings in prices. It is caused mainly because of supply-disrupting factors such as extreme weather, high 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.

The reasons for the current spell of high prices are not very different from those during earlier inflationary periods. While existing stocks from this year’s winter crop have been nearly exhausted—as they are usually are, at this time of the year— fresh harvests have been disrupted.

“Onion prices will remain elevated during the festive season. The full year onion output will likely drop by at least 10-15% due to weather-related damage to both the winter and summer crop,” said Abhishek Agrawal of Comtrade, a commodities trading firm.

On September 15, the government banned exports of all varieties as a precautionary step since domestic supplies showed signs of depleting due to a bad winter crop and brisk exports. According to official trade data, the country exported $328 million worth of fresh onions and $ 112 million worth of dried onions in 2019-20. Between April and July 2020, exports of onions to neighbouring Bangladesh soared 157.7%.

The government also banned onion exports in 2019 on September 29, 2019, after a bad crop crimped output. In December that year, prices soared to Rs 80 per kg in the national capital. The government lifted the ban on March 15, 2020 before re-imposing it this September.

“Prices will stabilise when the late kharif crop is fully harvested. The government is monitoring prices and stocks. Steps like the export ban were initiated well in advance in anticipation of a price rise. If needed, the government import will resort to imports,” said a senior official of the consumer affairs ministry, requesting anonymity.