After tomato makes pockets bleed, onion inflation to bring tears next?

People in the onion trade say this year’s winter crop – which caters to 70% of the annual demand – wasn’t robust compared to the previous year.

New Delhi: Onion supplies are tightening in some major markets and the kitchen staple could soon see an inflationary spell due an annual lean season when stocks dip, wholesalers and analysts have said. If that happens, it will hurt household budgets, already pinched by the steep rise in the price of tomato, retailing for upwards of ₹200 a kg in most cities.

The onion buffer is being maintained by the department of consumer affairs under a price stabilization fund, which aims at effective market intervention to cool prices when availability plunges. (HT File)

Unlike in tomatoes or most greens, whose elevated prices have hit households, in the case of onions, the government maintains nearly 250,000 tonne of reserves, which it releases to markets when supplies bottom out.

Yet, one characteristic of the base ingredient of most Indian dishes is price volatility. And once onion inflation, as a phenomenon, sets in, it takes considerable time to dissipate, trends show.

Farmers have reported a “lot of damage to stored onions” because of heavy rain over the past month, which has “decreased supplies”, Narendra Wadhwane, the secretary of Lasalgoan agricultural market committee, Asia’s largest onion market in Maharashtra, said on Tuesday.

“The government is monitoring onion demand and supply as we do in case of 22 essential items across 536 points across the country. We have enough stocks to intervene in the market and there is no concern,” a government official said.

People in the onion trade say this year’s winter crop – which caters to 70% of the annual demand – wasn’t robust compared to the previous year. During crisis years, India resorts to onion imports, but the country didn’t import any in 2021-22 and 2022-23.

Onion prices have stayed reasonable over the past four months. The months of August and September are usually a lean season. The next onion harvests will take place in October. Modal retail prices have remained stable at ₹25 a kg, according to official data. Modal price is a kind of average.

But analysts say a pricey spell is on the cards. “The acreage under rabi (winter-sown) 2023 (December 2022-January 2023) is estimated to have been lower by 3.5%, led by 25-27% lower realisation by farmers in the previous season,” said Pushan Sharma, economist with Crisil Market Intelligence and Analytics.

In February, high temperatures led to early maturity of onions, advancing harvests. This has lowered their shelf life, adding to the current strain, Sharma explained.

“Owing to the reduced shelf life and panic selling in February-March, rabi stocks are expected to decline significantly by end-August, which is likely to expose markets to tight supplies and high prices,” Sharma said.

Consumers are quite sensitive to a rise in onion prices, relative to many other commodities. While retail rates often soar, usually at this time of the year, it’s not uncommon for prices to crash.