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Price pinch: Rising food costs hit family budgets hard

India’s official numbers say retail food inflation was 2.15% in July. The actual situation, however, is the opposite.

india Updated: Aug 21, 2015 07:30 IST
HT Correspondent
HT Correspondent
Hindustan Times

India’s official numbers say retail food inflation was 2.15% in July. The actual situation, however, is the opposite.

Skyrocketing onion and other prices show food prices have more than doubled from last year.

Sample this: onions are now selling at Rs 80 a kg in some areas of Delhi compared to Rs 37 a kg in August last year. Worse, onion and other food prices have risen more than 50% since July this year.

This is mostly because of weather-induced supply shocks, first in March when unseasonal rains flattened ripening cereal crops, and the uneven monsoon rains from July to August that hurt sowing and harvesting of key staples.

The stored rabi onion has halved to 14 lakh tonnes from 28 lakh tonnes in July. Total onion production is estimated to be at 18.9 million tonnes in the 2014-15 crop year (July-June), lower than last year’s 19.4 million tonnes.

For middle-class consumers, food inflation worries are creeping back. Households across the country fretted as a nearly 75% rise in the price of onions — a key staple — since July to cross more than Rs 60 a kg in many local markets made the commodity almost as costly as petrol.

Increasingly, it is beginning to resemble a throwback to 2013 when onion prices retailed at Rs 100 a kg.

This isn’t a happy augury ahead of the festival season that could force millions of families to cut down on other expenses to make up for a ballooning food bill.

“Onion and pulse prices have upset our monthly budget,” Arunima Majumdar Guha, an east-Delhi resident, said.

Sumana Roy, a homemaker from Kolkata, said things were getting tougher.

“The festive season is coming. A shopping spree will start from next month. If prices of essential commodities shoot up at this moment it would be difficult for middle-class families like ours to make ends meet.”

The government has asked the state-owned MMTC to import 10,000 tonnes of onion — a key ingredient used in most Indian curries — to boost supplies to meet local demand.

The National Agricultural Cooperative Marketing Federation (NAFED) had on July 23 floated a tender to import onions, but did not receive a single response from any global supplier.

The government has now asked NAFED to cancel its tender and instead asked MMTC to import onions.

Pakistan, Egypt and China are the key markets that India is looking to source onions from.

Traders from Punjab have already started importing onions in small quantities from Afghanistan through the Attari-Wagah land route.

Besides, the government could announce another hike in the minimum export price (MEP) of onion to raise domestic supplies.

A higher MEP acts as a disincentive for selling the key staple in intern-ational markets.

Economists said this year the importance of the monsoon, and therefore agriculture, was magnified because the non-farm part of the Indian economy was struggling, as underscored by poor investment and manufac-turing activity.

“India has suffered weather-related turbulence for years but what is worrying is that with rising frequency of such events, the impact is getting increasingly amplified because holistic efforts to reduce structural vulnerabilities are lacking,” Dharmakirti Joshi, chief economist at CRISIL, a credit rating and research firm, said.

“We believe investing in Indian agriculture’s future has become economically and politically critical. The government needs to change the templates, and quickly so,” Joshi said.

Onion farmers, however, said they hadn’t benefited from high retail prices.

“Farmers are not getting anything even as the price is increasing. We have to clear our farms for the next crop and only those who can store onion can expect some benefit,” said Bhujbal, a farmer from Shikrapur near Pune.

Read:Steeper service taxes and food prices make dining out a luxury

First Published: Aug 21, 2015 00:28 IST