In an unstable retail market, the price of onions, an indispensable vegetable for the Indian kitchen, has seen an inflation greater than what was seen in the past five years. Markets are seeing onions priced from Rs 60 to Rs 65 at wholesale markets such as Lasalgaon, and from Rs 80 to Rs 100 at smaller shops. Some cities such as Bengaluru and Puducherry have suffered the greatest inflation, with onion prices crossing Rs 100 there.
The main reason behind this price rise, according to traders, is the stockpiling of the existing harvest of onions by farmers in hopes of better prices in the market – as the next harvest is delayed. The price rise came in the middle of the flood situation in Maharashtra, one of the major producers of onion in India. As harvest-ready crops of onion were affected by the deluge and the existing harvest is getting spoilt in the flood-hit districts of the state, it is expected that the inflated price of onions is going to stay in the Indian market for some time.
However, bringing onion prices down is important to help common citizens recover from the financial setback of the COVID-19 pandemic. The government has invoked the Essential Commodities Act 2020 to regulate onion stock stored with the traders and check black marketing, which will help bring down the price of the vegetable. The Act will be enforced till the end of this year as per government orders. As onion prices have risen by almost 115% when compared with the average price of onions in the past five years, such steps as the ECA are necessary.
While the ECA rules are applicable to traders, the Act fails to target farmers who hoard lakhs of tonnes of onions that will be released in an inflated market for better profits. The ECA provisions will, therefore, be only be partially effective in regulating the prices of onions.
The government has taken an alternative approach to bringing down onion prices, and that is by easing its import norms so that onions can be brought in from foreign traders and used to relieve the supply stress on domestic markets. A ban on onion export on September 15 and relaxed import norms till December 15 this year are expected to positively affect the domestic market and create a greater availability of onions for retail purposes. Onion stocks are generally expected to be released when the Kharif crop of onions is harvested, but most of the crop from the southwestern region stands spoilt due to the October floods. Therefore, releasing the existing stock and importing onions to increase supply to the market is the only way to control the prices. However, imported onions are not usually preferred by domestic consumers and generally bought by commercial establishments such as restaurants and hotels. Considering the prevailing factors, onion prices are predicted to stay high for few more months as the supply majorly lies in the hands of the farmers, who are not looking to liquidate their stocks anytime soon.