Onion prices may increase by 10-15% this season – Assocham


With retail inflation inching up contrary to expectations of downward movement, it is time to keep to eye on onion prices which may increase further by 10-15 per cent in the rainy season, according to an ASSOCHAM paper.

While onion is selling at Rs 1800-2500 per quintal in different wholesale mandis, the retail vendors are charging upward of Rs 30-Rs 35 per kg, Assocham said.

“Any rise from this level will exert pressure on the consumer price index inflation. The onion, being an essential item, evokes sharp reactions from the households and even the political parties. Thus, there is a need for being watchful,” ASSOCHAM Secretary General Mr D S Rawat said while releasing the paper.

Onion prices have been the subject of much manipulation and cartelization in India. Many operators have come together to buy up onions in the past and create artificial scarcities to drive prices higher.

Apart from the harvest losses, a significant part of production is lost in post-harvest storage and exposure. Hence, proper aerated storage is essential for maintaining the commodity till it reaches the consumers and other bulk users.

Maharashtra, Madhya Pradesh, Karnataka and Gujarat contribute over two thirds of all India onion production, with Maharashtra alone accounting for about 30% of India’s production, adds the study.

The monthly consumption of onions in India ranges from 8 lakh MT to 12 lakh MT depending on season and prices. Thus assuming an average consumption of one million MT per month, annual consumption of onions on all India basis is around 12 million MT. Considering storage and handling losses, the annual domestic requirement of onions at nearly 14 million MT.

India accounts for over 50% of the import share in Malaysia, Bangladesh, Sri Lanka, Indonesia, Nepal, Kuwait, Oman and Qatar, besides regular exports to U.A.E., Saudi Arabia, Singapore and Vietnam. Thus India leads in onion exports in the Asian continent. Small quantities of value added onion products viz. onion powder and onion flakes are also exported, noted the study.

ASSOCHAM has suggested timely and realistic assessment of crop and a reliable estimate of consumption requirement state-wise with proper understanding of peak demand period/month and volumes is a pre-requisite for prudent handling of the developing situation in onions.

The government has taken a decision to buy 30,000 MT onions through SFAC and NAFED for creating a buffer which is welcome. However, this quantity is grossly insufficient and government should rework the buffer requirement. Given the all India production of 15 million tonnes, ideally 1 to 5% buffer (or one month’s consumption need) will ensure a comfortable sailing all throughout the year, adds the chamber.

In the absence of minimum support price for onions and effective support operations, prices tend to drop steeply during peak arrival season. In the current year, already prices have shown signs of collapsing and the government needs to take prompt action to mitigate the woes of anguished farmers, the chamber said.

It further said on the distribution front government should create a network of outlets, preferably through NAFED, State Co-operatives, Mother Dairy and Civil Supply outlets. During periods of high prices, these outlets should start distributing onions across the country at pre-determined prices, without adding their margins

The requirement of onion is almost constant throughout the year and availability of fresh onion is limited to 7-8 months and hence there is a need to plan stock management (including buffer).

In order to prevent sudden spike, the state level agencies should consider distribution of onions from July onwards and also ensure gradual liquidation of stocks instead of holding it till the end of the season, which could result in financial and logistics implications.