Farm Reform. Peeling the onion on price decline

Onion farmers in Maharashtra are facing a crisis. The bulbs they have been hoarding for the past 4-5 months are earning them meagre ₹2-3/kg. The recently harvested Kharif onions also earn just ₹8-9/kg.

Just two months ago, onions were selling at ₹20/kg at the wholesale mandi in Nashik. So, why did the farmers not sell their stock then, and are now disposing them off at dirt-cheap prices? Also, if they have storage capacity, why are they not storing their kharif onions, when the pressure from the kharif supply is what accentuated the price fall.

The answer to the first question lies in the fact that farmers had planned to sell their produce at a higher price. Their calculations of onion prices rising in October-December went wildly wrong.

Maharashtra had a poor South-West monsoon in 2018. Thus, despite the area sown under onions being higher than the previous year, farmers anticipated a drop in output and consequently higher prices; they started to hoard onions for the October-December period.

But, what they missed to factor in was that the South-West monsoon was good in other onion-producing regions — Madhya Pradesh, parts of Rajasthan and Karnataka.

Data from the National Horticulture Board show that all-India onion arrivals at mandis from October to December were higher than that in the same period a year ago. Onion prices thus crashed. In Nashik, prices dropped from over ₹20/kg in October-end to 12.8/kg in November and further down to ₹8.4/kg in December. Farming has become a gamble, grieved a farmer who owns a two-acre land in Nashik.

For the answer to why farmers are not storing their Kharif onions, we approached a farmer from Naigaon, Nashik, whose family has been farming onions for more than three generations.

He explained: “Kharif (harvested in October-December) as well as late-Kharif (harvested in January-March) onions have high moisture content and can’t be stored. Only the rabi crop — harvested between March and May — is suitable for storage; it stays fresh for 4-5 months. But even these onions need to be disposed off by November-December as they start to rot when temperatures fall.”

Enough space

Most farmers in Nashik and other onion-growing regions of Maharashtra have storage facilities. But these are traditional mesh-framed structures with a metal-sheet for roof that do not offer fool-proof protection against wind/moisture and rain water. So, onions harvested in March-May that are kept in these storehouses have to be sold before the winter months begin.

Maharashtra, which produces a third of the country’s onions, has enough storage space for the bulbs, said a source from the State Horticulture Department. Given that not all the 60-65 lakh tonnes of onions that the State produces reaches the market at once (it is spilt 20-20-60 in kharif, late-kharif and rabi), the storage capacity of 20-25 lakh tonnes Maharashtra currently has for onions is more than enough, added the source. In other major onion-producing States, too, storage structures have been built with government subsidy, claims the officer.

Data that BusinessLine sourced from the Maharashtra Horticulture Department showed that the State has a 21-lakh tonne storage capacity for the bulbs.

Of this, space for 14 lakh tonnes was built by farmers with government subsidy (up to 50 per cent of cost), while the rest was built privately. The structure mentioned here is a normal storehouse, and not a scientifically planned one with temperature/moisture control or cold storage.

When asked why not cold storages for onions, the officer replied: “It is not a commercially viable solution”. To create a cold storage facility that can hold 5,000 tonnes of onions, one will require an investment of about ₹25 crore.

With the same investment, a well-ventilated storehouse made of bamboo (as per the recommended design of the Maharashtra Agriculture University) can be built for 35-40,000 tonne of onions, said Yogesh Thorat, Managing Director, MahaFPC, a consortium of farmer-producer companies in Maharashtra.

Further, there are operational issues in keeping onions in cold storages. For the bulbs to be stocked in cold stores, they have to be first dried. It is necessary to dry the neck tissue and outer scales, otherwise the bulbs will rot in storage, say experts. Also, once removed from cold storage, onions sprout and spoil within 48 hours.

Bhausaheb, a onion farmer from Pimpri Gawali, Ahmednagar, who built his 25-tonne onion storehouse with help from government subsidy (total cost was ₹7,000/tonne), said: “There is no need of cold storages; the bamboo storages are good enough. Earlier, we used to store onions on the floor near the field and the they got spoilt because of moisture. But now, there is no such problem; the storehouses are made of bamboo and there is ventilation from all sides, so onions don’t rot.”

Where’s the gap?

What Maharashtra and other onion-producing States lack is cluster-level storehouses. Currently, since storage infrastructure is at the farmers’ level, aggregation is difficult. It also throws challenges in sorting and grading of export produce, said Thorat. Maha FPC is now connected to 7,500 onion farmers in and around Nashik.

Cluster-level storehouses could be used by farmer-producer organisations (FPOs) as well as individual farmers to directly reach out to buyers. They can function as a secondary market and attract exporters. It will also help in inter-State trade.

One commendable effort in this space is the work being done by the National Agricultural Cooperative Marketing Federation (NAFED).

Last year, the Centre had set NAFED a procurement target of 25,000 tonnes of onions. But it procured only about 13,000 tonnes because of the lack of storage facilities. So, this year, NAFED is focussing on building warehouse infrastructure.

In partnership with MahaFPC, NAFED is building cluster-level storage for onions at 25 locations across the State, each with a capacity of 1,000 tonnes. Once this develops, “it will give farmers a holding power. They will be able to sell their produce in a phased manner whenever the price is remunerative,” said SK Singh, Additional MD, NAFED.

These warehouses can also work as standalone markets. And, if they become WDRA (Warehousing Development and Regulatory Authority)-registered warehouses, farmers will also be able to borrow easily by pledging their electronic warehouse receipts.

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