Onion prices again

Ever since 1980, when a sharp rise in onion prices first became a major election issue, contributing to the defeat of the ruling dispensation and the return of Indira Gandhi to power, onions have been a politically sensitive commodity. That this is with good reason was confirmed in 1998, when a spurt in onion prices influenced poll results in the assembly elections in Delhi and Rajasthan. Today's outcry over an increase in onion prices of more than 10 per cent in one short week is, therefore, understandable. So is the discomfiture of the administration over this issue, and it explains why onions hog the limelight though the spurt in the prices of vegetables like tomatoes and potatoes, which are equally significant items in the food basket, has been even sharper in many consuming centres. Such a price surge in vegetables is not unusual for this time of the year, when stocks from the previous crop tend to get depleted and the fresh crop happens to be still in the fields. Besides, rains and floods, which are normal for this period, pose logistical hurdles, adversely affecting supplies.

The prices of onions as also of many vegetables are notoriously unstable, fluctuating by margins that would be unheard of in industrial products or even in foodgrains, and even a marginal shortage or surplus creates a huge swing in prices. There is no obvious way to counter-act these market forces, except to even out the production cycle to the extent possible, and to build export markets that can absorb excess production. Unfortunately, what the government does is exactly the opposite.

Right now, the situation is that onion inventories from the main summer crop in states like Rajasthan, Madhya Pradesh and Gujarat have been almost exhausted. At the same time, supplies from Maharashtra's key onion belt of Nashik and Lasalgaon have come under strain due to increased demand from the north and bulk purchases by retail chains. This situation cannot be expected to ease until the next onion crop begins to be harvested in mid-September. Fortunately, the acreage under that crop is reckoned to be relatively large and, thanks to good crop stand, output is projected to be higher by some 20 per cent.

Political sensitivity on onion prices has not improved price management. Panic reactions from the government often accentuate price swings and speculative play. This year, the minimum export price of onion has been hiked at least five times in the past eight months, including twice in August. Such moves, designed chiefly to benefit consumers at the cost of producers, have proved a major factor in keeping onion production unstable and prices volatile. As such, onion growers are at the receiving end in all situations, whether they have a good or bad harvest. While they suffer losses when production rises and prices dip below costs, they are no better off when production drops because prices are not allowed to discover their true levels.

Fortunately, the onion is a short-duration crop which can be grown several times in a year in different parts of the country. Though the storage life of the bulbs is low, the crop calendar is such that no single price trend lasts too long. The trick for politicians, in the absence of a long-term strategy, would be to avoid calling elections when an onion shortage is expected.