A The farmer spends anywhere between Rs 4 to Rs 8 to produce one kilo of onions. According to the inflation-adjusted data of the Directorate of Economics and Statistics for 2019-20, if one includes the cost of own labour, capital and land, this cost can go up to Rs 15 per kg in some states.
In February this year, the wholesale price of onion in Maharashtra’s Lasalgaon had dropped to around Rs 6 per kg Marketwhich is the largest onion in asia Market. were there reports Onion prices have dropped to Rs 2 per kg in some areas. This prompted the government to act as it directed the National Agricultural Cooperative Marketing Federation of India (Nafed) to start procuring onions. Market. As a result, onion prices, which were falling, started stabilizing and came down to around Rs 7.3 per kg by March 7. While this offered some relief to farmers, it is only a bandwagon or a temporary solution to a structural problem affecting farmers with crops such as onions and potatoes.
State and central governments need to take medium and long term measures to provide stability to these markets.
Indian Onion – Rabi, Kharif, Late Kharif
Onion is a crop of about 3.5 months in India, which is sown and harvested three times a year. The three cropping seasons are Kharif, Late Kharif and Rabi.
Rabi is the most productive season 75 percent of onions of India in a year. This crop is sown between December and January and harvested in the month of late March to May. The second most important kharif onion crop is sown around the monsoon months of July-August and harvested later in the same year. This season provides about 15 per cent of the annual onion supply. A small, but growing contribution is made by the late kharif crop, which is sown around Diwali (anywhere between October and November) and harvested between January and March. This crop is now coming in the markets. nearby 10 percent Maximum onion in the country comes from this season.
Some observations about Indian Onions:
- Fresh onions are available in the market for seven to eight months every year—especially from October to May. The demand for the remaining about five months, from June to September or October, is largely met by stored onions.
- Due to their low moisture levels (crops sown in the monsoon months have higher moisture levels and thus a relatively shorter shelf life), the rabi crop enters storage and is stored for the five months mentioned above or for the next Feeds the country till the big crop enters the market. October or November.
- Three states, namely Maharashtra, Madhya Pradesh and Karnataka, supply about 60 per cent of India’s onions.
- There is seasonality in onion prices. In an average year, onion prices are usually lowest between March and June and start rising thereafter. Depending on the size and condition of stored rabi onions – which are sometimes affected due to rain – and the condition of the upcoming kharif crop, onion prices usually peak around September or October when the stored crop is at its peak. Occurs at the lowest level (Figure 1).
- Like many other crops, onion farmers have also been found to be responsive to prices. Better prices encourage onion acreage, and lower prices shift it to other more remunerative crops. The hammock area has been studied to be anywhere between 10 and 15 percent. This makes the pattern of onion excess and deficit almost predictable and inescapable.
Figure 1: Wholesale price (Rs/kg) of onion in Lasalgaon mandi. Source: Agmarknet. Accessed March 2, 2023
Big Rabi Glut
What happened to onions this year? The analysis for this can start from last year’s rabi onion crop (sown in December 2021/January 2022 and harvested around March/April 2022). As against the general average of about 10 lakh hectares, Area It was about 11.7 lakh hectares. Buoyed by good yields, rabi onion production is set to reach around 23 million metric tonnes by April 2022 against the normal of around 19 million metric tonnes. This pushed onion stocks up, resisting any upward price pressure in the year. With good post-kharif and late kharif crops coming up now, onion prices are falling, especially from November 2022. (Figure 1). They hit their all-time low in February 2023 with the delayed arrival of Kharif. Therefore, the status of onion arrivals can be seen from last year’s rabi season. Thankfully, Indian onions today are globally price competitive, and the business has access to profitable markets abroad. This has restricted the free fall to some extent which this year’s onion crop does not get.
The problem is not only of this year. It is about the intrinsic structural character of crops like onion, which have short shelf life and limited demand for its processed products.
In addition, the onion crop, as stated earlier, is cyclical. If prices are high, farmers expand acreage. More acreage produces a good crop until it is damaged by pests or weather, pulling down market prices on the crop. And low prices discourage acreage in the next cycle, which reduces crop size and drives up prices. And this cycle continues for years.
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Treating Onion Tears—Access To Information
Farmers need access to reliable market and price information. Timely access to information about market prices in neighboring districts, Mandis, or neighboring states give rights to farmers regarding their decision to sell. Audio or typed messages in local languages, may be received on his or her mobile or smartphone, be it on free or subscription mode, can provide him with vital price information to help him decide the location and volume of sales.
If a farmer chooses to defer his sales, then access to storage becomes critical. To meet his expenses he would need economical storage and credit. Despite the extraordinary success of the government’s initiative to expand Kanda move (on-field onion storage structures) and large inflow of venture capital funds to start-ups, there has been no success in developing storage technology for kharif and late kharif onion crops. Eventually, the solution will emerge from a technological breakthrough.
Another low-hanging intervention is rationalization of intermediary costs and connecting farmers directly with consumers wherever possible. Start-ups in this area certainly haven’t had that much success doing so. Retail onion prices in Mumbai and Delhi remain at Rs 27 and Rs 23 per kg, while farmers in Lasalgaon are getting around Rs 7 per kg.
Can Indian consumers be motivated or directed towards increased use of dehydrated onions? Stimulating the demand for processed onion products, both farmers and consumers are likely to benefit from increased production and price stability.
The government had created a Price Stabilization Fund (PSF) in 2015-16 to address problems like the current one. This fund can be used to buy agricultural produce even if it is not covered under the Minimum Support Price (MSP). Not only this, PSF enables the government to buy a commodity at the market price, which may be higher than the MSP. In this case, the market value is already so low that such intervention becomes unviable.,
Like Nafed, the Small Farmers Agri-Business Consortium (SFAC) has also been nominated by the government in the past to procure onions. State Governments have been enabled to set up their own PSFs. But officials shy away from buying any commodity if it does not come under the purview of MSP. The procuring agency has incurred losses in the past and there is reluctance to procure from the open market due to fear of objections from the Comptroller and Auditor General (CAG) and threat of probe.
The government has a distribution network only in some metropolitan cities. For example, onions have been sold through Mother Dairy’s booths in the past in Delhi. Similar institutions do not exist in most other states.
Unless more medium to long-term measures are put in place, onion tears will continue to plague everyone, from farmers to consumers, with an almost predictable certainty every few years.
Shweta Saini is an agricultural economist and co-founder of Arcus Policy Research and Siraj Hussain is a former secretary to the Government of India. The views expressed are personal.