The onion market has crashed dramatically just in time of the arrival of fresh kharif produce. After onion’s dramatic price up and down, now it is the turn of pigeon pie-led pulses to burst the chart. Come December, price of pulses too will cool dramatically as traders’ welcome new arrivals. The pattern of sharp rise and fall of prices of these ‘essential’ commodities are all too familiar. There is only one winner and it is very rarely the farmer.
A recent report in this newspaper highlighted the extent of market manipulation. NITI Aayog estimated that middlemen in the onion supply chain have pocketed about Rs 8,000 crores in August and September this year. The onions sold in these months were harvested during February-May and procured at Rs 10-14 per kilo. The unseasonal early rains had impacted the rabi produce and it was expected that prices would rule higher than previous years during July to October. With no stock holding power, farmers are mute spectators in cartel driven off-season trade.
The standard operating procedure from successive governments in times of price spikes has been to clamp down on exports, raid a few warehouses, talk about huge imports and activating its agencies like Nafed and SFAC to procure and distribute. All efforts so far have been targeted towards short-term management of price expectations rather than fixing the supply chain for long term gains. The focus should be targetted towards extending the supply season so that there is little opportunity for hoarders to cash in when arrivals thin out.
Meanwhile, on-farm storage has been all the rage from Australia to the US. The on-farm storage capacity in the US now exceeds the off-farm commercial storage by about 2 billion bushels. The silos, bins and sheds give the farmer an advantage of selling at least some of his produce at a later date and access to commodity derivatives gives them an avenue to hedge risks.
Back home, some farmers too are upping their game by improvising traditional storage methods to hold their produce longer. Rabi onions are being stored on-farm till June-July in makeshift shelters. The summer heat quickly saps moisture from onions and improves appearance. A well-dried pigeon pie sack can be stored up to two years with minimal insect damage. A few sachets of oxygen absorbers can extend shelf life of many food items. But to tame the huge swings in the commodities markets, a nationwide programme to improve on-farm storage is needed. Metal silos, raised ventilated sheds and solar dryers will certainly better farm incomes and reduce post-harvest loses. Creation of these capital assets will stabilise markets and reduce huge price swings in staples.
Commodity markets is an important source of unaccounted money. If our mandis worked as intended, the ill-gotten Rs 8,000 crore or at least a major chunk of it would have been with the onion farmers. Or the government would have been richer by Rs 2,400 crores from direct tax receipts. Unfortunately, the unscrupulous money would be put to use to rig the next commodity. The current policy to subsidise construction of 5,000 MT warehouses is only creating capacity to further perpetuate the market manipulation.
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Aruna Urs farms in his village in Mysuru, Karnataka. He was co-founder and CEO of a database management company in Mysuru. Prior to that, he worked as an adviser to the government of Timor-Leste (East Timor).
Aruna blogs about farming, rural & agri economy on his blog, Rural Dispatch, a part of Business Standard's platform, Punditry.
He tweets as @arunaurs