Kitchen staple onion prices remain above Rs 45/kg, supply shortages persist

Many onion traders are holding back their stock, anticipating further price increases due to the potential for heavy rainfall in October and November, which could disrupt supply

The prices of essential vegetarian kitchen items are on the rise, with onions leading the surge. Kitchen staple onions are priced on average at Rs 45.69 per kilogram, significantly higher than the price of Rs 31.4 per kg during this time last year, according to data from the Price Monitoring Cell of the Department Of Consumer Affairs.

According to a report by The Economic Times, onion prices in most metro cities have even climbed above Rs 50 per kg, including Delhi, marking a 25 per cent increase over July. This rise is attributed to the end of the Shravan month, during which many Hindus in North India abstain from onions and follow other dietary restrictions, leading to a surge in demand as the period concludes.

At Maharashtra's Lasalgaon wholesale market, India's largest onion trading hub, the average price of onions has surged by around 30 per cent over the past month, reaching Rs 35 per kilogram as of Wednesday, the report added. Onion traders have reported that many participants are holding onto their stock, anticipating further price increases due to the potential for heavy rainfall in October and November, which could disrupt supply.

Earlier this month, Maharashtra Deputy Chief Minister Ajit Pawar "apologised" for the central government's decision to ban onion exports late last year, calling it a mistake. The ban, which was intended to curb rising prices, sparked protests from farmers in Maharashtra, a major onion-producing state. Although the ban was extended in March, it was lifted in early May, just before polling in Maharashtra's onion belt.

Why do onion prices continue to remain high?

Retail prices of onions in India remain elevated due to a combination of lower-than-expected production and market dynamics, according to a report by The Indian Express. One of the primary factors is the reduced rabi acreage from the previous year. The rabi onion crop, sown in December-January and harvested post-March, typically constitutes over 72-75 per cent of the country's total onion consumption. However, this year saw a significant decline in the area under rabi onion cultivation, with only 756,000 hectares sown compared to 1.23 million hectares in 2023.

The central government had estimated a production of around 19.1 million tonnes of rabi onions, which was expected to meet domestic demand. However, the actual area sown fell short of expectations, contributing to the supply shortage

Additionally, kharif onion sowing this year has also been lower than usual, with only 154,000 hectares reported, down from 285,000 hectares last year, the report added. This decline in sowing has further strained the supply. Although recent good rainfall in Nashik and other regions may lead to an increase in kharif sowing, the current scarcity has already impacted prices.

Farmers and traders have been holding onto their harvested rabi onions, delaying their release into the market, further driving up prices. The uncertainty about the upcoming kharif crop has added to the price surge. According to traders in Lasalgaon, India's largest onion wholesale market, prices may stabilise once the new crop arrives later in the year.

The central government has maintained strict control over onion exports, imposing a high export duty of 40 per cent and a minimum export price (MEP) of $550 per tonne, effectively curtailing exports. India, a major onion exporter, has shipped only 91,316.31 tonnes this year, a stark contrast to the usual 2.4-2.5 million tonnes.