How traders may have pocketed Rs 8000 cr during onion crisis

NITI Aayog's analysis has brought out the need for state-intervention in the onion market

An analysis by the NITI Aayog on this year's onion crisis shows traders could have milked Rs 8,000 crore from consumers in August and September by manipulating prices.

The Aayog recently met the ministries concerned to find a long-term solution to recurring onion crises. It arrived at the cost of market manipulation on the average monthly consumption of onions in the country, multiplied by the extra amount consumers paid in these two months.

"The rough calculation comes to Rs 8,000 crore, which is the price consumers were forced to pay to traders and middlemen this year," a senior official, who participated in the discussions, said.

Officials from the ministries of agriculture, consumer affairs and commerce, the Indian Council of Agriculture Research (ICAR), Nafed, and the Small Farmers Agri-business Consortium (SFAC) took part in the meeting.

India usually consumes a little over a million tonnes of onions a month. Retail onion prices had jumped to almost Rs 70 per kg in many cities in August and September this year, nearly Rs 40 more than the average price a year ago.

The analysis brought out the need for state-intervention in the onion market. The most agencies such as Nafed and SFAC incur on storing onions is Rs 100-200 crore, miniscule compared to what consumers paid extra in the country's most recent onion crisis.

"It is imperative to use price stabilisation instruments to deal with onion crises," the official said. The government will use a Rs 500 crore price stabilisation fund to intervene when onion and potato prices flare up.

 

Nine states applied for money from the price stabilisation fund this year for intervention over onions. The Centre bears half the loss incurred by state agencies and the entire expenses of central agencies in procurement and distribution of onions and potatoes.

Between August 16 and August 30, onion prices spurted 50 per cent due to a sudden fall in supply to the main wholesale markets of Nashik. Official figures show the average retail price of onion across the country was Rs 51 per kg on September 30, almost double the price a year ago.

The central government decided to import 10,000 tonnes of onions and the first batch of 250 tonnes has already arrived.

Onion prices tend to move up between June and September, as the winter crop is exhausted before the early summer harvest arrives.

This year, a large part of onions harvested in March-May was destroyed by rain and hails in February and March. Also unusually dry weather in Maharashtra and Karnataka delayed early kharif sowing. This created an extended period of shortage, which was milked by hoarders.

India is estimated to have produced 18.92 million tonnes of onions in 2014-15, almost 478,000 tonnes less than the previous year.

NAFED and SFAC were provided interest-free advances of Rs 7.94 crore and Rs 8.75 crore, respectively, to buy onions directly from farmers and they bought 8,368.52 tonnes in April at Rs 19-20 per kg.