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Govt's insistence on e-tendering worsened onion crisis

The government has failed to import onions quickly enough yet again despite early signs of a bad harvest, as prices of the commodity surge worryingly ahead of a festival season.

india Updated: Aug 25, 2015 02:29 IST
Zia Haq
Zia Haq
Hindustan Times
An onion shop at Indore Mandi on Sunday. Onion prices have gone up more than threefold in the past fortnight. (Shankar Mourya/HT)

The government has failed to import onions quickly enough yet again despite early signs of a bad harvest, as prices of the commodity surge worryingly ahead of a festival season.

Timely imports, quick landing of shipments and distribution are not easy in any case. This time a flip-flop on which agency should handle shipments and how bids should be processed may have delayed imports after an initial attempt at finding foreign suppliers through a global tender drew a blank.

Wholesale prices of onion, the base ingredient for almost all Indian dishes, are at a two-year high while consumer prices are near 2010 levels, the last time the country faced a shortage as a drought drove output down.

A series of storms and hail this spring cut total output from about 19.4 m tonnes during 2013-14 to 18.9 m tonnes in 2014-15.

A much-talked about tender to contract 10,000 tonnes of imports languished through the whole of July, although that would hardly make up for a current shortfall of 400,000 tonnes.

As prices began inching up, the government asked state-owned trading agency Nafed to call for global bids to improve domestic supplies through imports. The agency floated a global tender on July 24, which failed to get buyers.

The agency hoped traders from Pakistan, Egypt and China would vie for its offering, but Nafed’s norms and conditions might not have appeared lucrative enough, an official said.

Midway, the government decided that Nafed should not go ahead with the job. It decided that a state trading agency which could conduct e-tendering or hold the bidding process completely online should be given the task to ensure greater transparency.

The government was wary about rushing imports, the official said, adding that it feared any violation of norms could result in criticism from the Comptroller and Auditor General, which scrutinises all such deals.

“That process was withdrawn after the government felt it did not want Nafed to go ahead without e-tendering,” the official said. Nafed chairman VR Patel said the decision to switch to MMTC Ltd was the “government’s choice”.

“As far as the crisis is concerned, onion scarcity has become a repeated thing. The government should procure sufficient quantities of onions, like wheat, when domestic stocks are plenty. That’s the only solution,” Patel said.

On Monday, Union minister Ram Vilas Paswan said the crisis had “worsened” due to hoarding by both retail and wholesale traders. He said inter-departmental surveillance teams had been formed to keep a watch on stocks.

The government follows a familiar track to cool rates. The firefight usually begins with curbs on exports to augment domestic availability, which means making Indian onions expensive for foreign buyers so that availability at home increases. This is done by raising the minimum export price.

On June 26, the government raised the minimum export price to $425 a tonne from $250. On August 22, this was further raised to $700. With international prices ruling cheaper than domestic, this obviously has done little to cool rates.

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First Published: Aug 25, 2015 00:16 IST