Just days ahead of the 2020 Bihar Legislative Assembly Election, the Central government on Friday imposed a stock limit on onion with immediate effect to moderate its prices and availability in the retail market. The stock limit will now be 25 metric tons for wholesellers and 2 metric tons for retailers for a period up to December 31.
Against the backdrop of the price rise observed since the second week of September, retail onion prices are ruling over Rs 75 per kg in some places at present. In some cities, rates have gone up as high as Rs 100 per kg, as per the government data.
The government has taken several steps to increase domestic availability and keep prices under control till the arrival of fresh kharif crop from the second fortnight of November.
It is to be noted that merely a month ago, the Parliament had passed the Essential Commodities Act, 1955, that excluded onion, potato, pulses and some other food items from the list of essential commodities. This basically meant that these commodities were made to exist outside the storage limit, since the Essential Commodities (Amendment) Act, 2020 provides for the circumstances or imposition of stock limit under extraordinary price rise.
But due to the rising prices of onion ahead of the Bihar elections, the central government has once again had to step up and control the prices. This has raised questions among several fronts as to why the onion prices continue to fluctuate.
To what extent did the onion prices rise?
The all India average retail price variation of onion as on Wednesday when compared to last year was 22.12 per cent (from Rs 45.33 to Rs 55.60 per/kg). The average is 114.96 per cent (from Rs 25.87 to 55.60 per/kg) when compared to the last five years.
Therefore, the prices have increased by more than 100 per cent when compared with average of last five years and thus the price triggers under the EC Act have been reached, the Consumer Affairs Ministry said.
Why are onion prices rising?
As per the Ministry, these developments on the weather front have contributed to the sharp increase in onion prices.
Onion prices have been rising sharply across India since the last week of August. Earlier reports claimed that heavy rains in North Karnataka caused damage to the onion crop for the kharif season. This crop was supposed to be harvested in September and remain in the market till the time the crop from Maharashtra arrived at the end of October.
However, heavy rains in September caused a major loss of new crop in Karnataka. It also affected the onions in storage in Madhya Pradesh and Gujarat. Only the farmers of Maharashtra had been left with onion in the markets, of which 28 lakh tonnes had been kept in stock at the beginning of summer. However, the farmers of Maharashtra also had to suffer a loss of 50-60 per cent onion yield due to faulty storage. In Ahmednagar, Nasik and Pune, there was a lot of damage to onion due to the rains as well.
On the other hand, agriculture officials say that the shelf-life of onion remained low this year as the farmers used urea more than they needed. Last year, onion prices were good and farmers wanted to increase their yields through urea. But unfortunately, it ended up damaging the shelf-life of the crops.
In Maharashtra, only 10-11 lakh tonnes of onion is now left out of 28 lakh tonnes of onion kept in storage. The consumption of onion in India every year is close to 160 lakh tonnes. In Maharashtra alone, 4,000-6,000 tonnes of onion is used every day.
What about importing onions from abroad?
Onion imported from Iran peaks to a price of Rs 35 per kg at Mumbai port. If the prices of transport and handling are added to it, the price of onion may go up to about Rs. 40-45 per kilo. However, traders say that such onions are only invited by hotels and hospitality industry and not retailers. Such onions do not have the aroma as that of the native ones and are larger in size than Indian onions.
To additionally ensure availability of the staple in the Mandis, the Ministry said, the government has taken steps to facilitate import of onion and on Wednesday, relaxed the conditions for fumigation and additional declaration on Phytosanitary Certificate under the Plant Quarantine Order, 2003, for imports up to December 15.
The Indian missions in the relevant countries are already contacting the traders for ensuring greater imports of onions to the country.
"Such consignments of imported onions, which arrive on Indian ports, through land or sea, without fumigation and endorsement to that effect on the PSC, would be fumigated in India by the importer through an accredited treatment provider.
"After fumigation, these consignments would be released with no additional inspection fee and an undertaking will be obtained from the importers that the onion will be used only for consumption and not for propagation. Such consignments of onions for consumption will not be subjected to four times additional inspection fee on account of noncompliance of conditions of import under the PQ order, 2003," the statement said.
Measures taken by the government
Monitoring the rise in prices of onion, on a day-to-day basis through a dashboard by the Department of Consumer Affairs, officials indicated the requirement of immediate steps to cool off the spiralling trend, the Consumer Affairs Ministry said in a statement.
In order to moderate the price rise, the government took a pre-emptive step by announcing a ban on onion export on September 14 so as to ensure availability to domestic consumers at reasonable rates, before the expected arrival of Kharif onion, said the statement.
"To tide over the present situation, the government has stepped up disposal of onions through the built-up onion buffer stock from the Rabi onion-2020 of I LMT which was doubled since the quantity of last year."
The release of onion from the buffer stock is being carried out swiftly but in a calibrated manner from the second half of September this year to major `mandis` as well as to retail suppliers such as Safal, Kendriya Bhandar, NCCF, TANHODA and TANFED (Tamil Nadu), and NAFED outlets in major cities and also through the state governments.
Presently, Assam and Kerala are being supplied from the retail disposal mechanism, while Andhra Pradesh, Telangana and Lakshadweep have also placed their requisition for onions, and these are being dispatched, said the Ministry.
Further, onions are also being disposed of through Open Market Sales, it said, adding this will be stepped up further to bring down the price rise.
"An estimated Kharif crop of 37 LMT is also likely to start arriving in the Mandis that will add to the availability of onions," it said.
The central government has expressed hope that with the arrival of kharif onions this season, their prices will come down in the market. However, with the loss of crops due to rain, the onions from Maharashtra will now hit the markets by the end of November, instead of the usual timeframe of early weeks of November. Unfortunately, that means onion prices could take a relatively longer time long time to reduce the prices of onion.
(With inputs from agencies)