Onion prices surge ahead of Diwali due to heavy rains and supply issues

Onion prices have surged ahead of Diwali, reaching Rs 60-80 per kg, as heavy rains damage crops and disrupt supply; government efforts to stabilise prices are underway

Onions are currently priced between Rs 60-80 per kg in retail markets and are expected to stay high through Diwali. The surge is primarily driven by heavy rainfall in key onion-producing states such as Maharashtra, Karnataka, Telangana, and Andhra Pradesh, which has damaged crops and hindered supply.

As a result, prices of onions, tomatoes, and cooking oils have contributed to September’s inflation hitting a nine-month high, with food inflation expected to remain elevated in October, according to a report by The Economic Times.

In the Lasalgaon wholesale market of Nashik, onion prices have fluctuated between Rs 45-50 per kg for over a month. The government had anticipated a drop in prices coinciding with the harvest of the kharif crop, which is underway in several southern states. However, ongoing heavy rains have adversely affected crop quality in various regions, leading to waterlogged fields and delaying harvests by 10 to 15 days, further straining supply.

 

The report quoted Vikash Singh, an onion exporter from Maharashtra, as saying that the kharif onion harvest will be delayed in areas experiencing rainfall, which could keep prices stable for at least two to three weeks.

Government intervention

To mitigate rising prices, the Centre has started retail sales of onions from its buffer stock. Additionally, it has launched a ‘Kanda train’ service to transport onions from Nashik to Delhi, aimed at lowering transportation costs and increasing availability in northern India.

The heavy rainfall has significantly impacted the quality of onions ready for harvest across southern states. The report quoted Tonkini Pramod Kumar, a trader from Hyderabad and owner of Sri Swami Ayyappa Traders, as saying that the quality of onions has deteriorated substantially due to severe rainfall in Kurnool and other areas of Telangana and Andhra Pradesh.

The surge in prices for onions, tomatoes, and cooking oils has propelled India's retail inflation — previously at a five-year low of 3.65 per cent in August — to a nine-month high of 5.49 per cent in September. Food inflation, which constitutes a major portion of the Consumer Price Index, increased from 5.66 per cent in August to 9.24 per cent in September.

Cooking oil prices on the rise

Edible oil prices saw their first rise in September after a two-month pause and are expected to remain firm in the near future. This rise is attributed to a hike in import duties by the Indian government, coinciding with a global spike in palm oil prices. India relies on imports for approximately 60 per cent of its cooking oil needs, with palm oil accounting for the largest share.

The Malaysian Palm Oil Board indicated that palm oil prices are likely to remain above RM 4,000 per tonne in October, citing ongoing uncertainties and a significant decline in year-over-year palm oil inventories from Malaysia as factors contributing to high prices, the report said.