Oh Onion!!

All you need to know about onion-price-rise

If you can’t imagine your meals without onions, get ready to either loosen your pocket or learn to not loosen your tongue!! The spectre of rising onion-prices is back to haunt and will keep haunting for at least few more weeks to come. Here’s a look at what you need to know about your favorite kitchen-ingredient:

Why the price-escalation?

Last year, drought in Maharashtra, the biggest onion producer in the country, already led to production-shortage and this year due to untimely rain in the same state including Rajasthan, Andhra Pradesh and Karnataka destroyed the liliaceous plants whose edible bulbs i.e. onions are the major mainstay of Indian cuisine. However, an internal note prepared by the Ministry of Consumer Affairs says "It was observed that there was only 5 per cent lower production of onion during 2012-13 as compared to 2011-2012 and storage was less by only 2 lakh tonnes. But there was a sharp decline of market arrivals by around 20 to 40 per cent during June-July, 2013 as compared to 2012. It seems that the stored onion was not released to the market timely and either farmers or traders are making undue profit by creating artificial scarcity. Accordingly, prices increased almost double the level as compared to 2011-2012."

Thus hoarding by opportunist suppliers and farmers is another major reason behind prices going north apart from shortfall in production.

What is being done by Govt?

Government has imposed export restriction on regular variety of onions by setting Minimum Export Price at $650 a tonne. It has also eased quarantine norms, especially those of fumigation so that onion-imports from Pakistan, China and Egypt can be facilitated. Anti-hoarding drives are also on at wholesale markets, thanks to which supply in the last couple of days has improved. Apart from this onions are being sold at less than Rs 5-6 from retail prices in Government fair-shop outlets.

Will the prices go down any time soon?

Yes but marginally! As recent exponential price-rise has resulted in demand-slowdown and measures taken by Govt. have led to improved supplies, prices will surely stabilize but merely at measly lower peak than today. It will hover around between Rs 50-80. They will come back to normalcy only after new produce lands in market and which is likely to happen by October 2013.

Economic impact:

Consumer Price Inflation, the one being borne by us, has come down to 9.6% in Jul 13 from 9.9% of the previous month. But due to surge in onion price including other vegetables, CPI is likely to go beyond 10% in the months to come as food articles account for 50% weightage in CPI.

Political Impact:

Political cost of onion is too much to afford for Government. Given that Assembly elections in many states including Delhi are looming and Lok-Sabha election is also in the offing, onion price rise is likely to become a significant election issue. Government will try its best to not let people shed onion-tears but its efforts won’t pay out much given the agitation and furore created by opposition. For instance, major opposition party BJP is selling onions at Rs 10 per kg in Odhisa in order to raise protest against Government.

It is notable here that it was the failure of BJP to control spiralling onion prices in 1998 which led to the victory of Sheila Dixit, current Chief-Minister of national-capital, in Delhi assembly polls. One never knows how things will turn out after 15 years in November!! Victory-cause itself might prove to be the failure-cause for the Delhi Chief-Minister.

Thus, onion, historically being a politically sensitive commodity, will give a tough time to Congress in coming elections.

Collateral damage:

As onion is one of the two trend-setter vegetables in food basket, other being potato, onion price rise automatically leads to escalation in prices of other vegetables.

 Tidbits:

Ø  Lasalgaon at Nasik in Maharashtra is the largest wholesale onion market in Asia. Currently    onions here are trading at Rs. 42 per kg.

Ø  Delhi Govt. has facilitated onion-sale at Rs.50 per kg from 1000 points across the city.

Ø  Few restaurants in B’lore have taken onion-dosa off-the-sale for time being.

Ø  A tyre-seller in Jamshedpur is providing free onions on the purchase of a truck/car tyre.