Why onion price spikes get you teary

They happen every year because of transport delays and wrong forecasts

The recent spike in onion prices, to ₹23/kg, predictably gave rise to an uproar. Fresh kharif arrivals from Karnataka, Andhra Pradesh and Telangana helped moderate the prices. But it’s worth remembering that such spikes in onion prices in October are not new.

About the same time last year, for instance, onion prices rose to ₹27-29/kg in the wholesale market at Lasalgaon, Maharashtra.

 

A close look at the production, demand and storehouse availability numbers for onion shows that supply chain inefficiencies are the main reason for the sharp increase in the price of the crop every October.

Barring exceptional years, when there is either excess rainfall or a failure of monsoon in the kharif season or a pest attack, onion prices are strongly correlated to market arrivals.

Onion prices typically peak during the lean season of September-October and fall during April-May, coinciding with the peak arrival season of the rabi season crop (see infographic).

In India, onion is grown in three crop seasons: kharif (harvested in October–November), late kharif (January–February) and rabi (April–May).

The rabi season crop is the largest, accounting for about 60 per cent of annual production; kharif and late kharif account for about 20 per cent each. India produces about 200 lakh tonnes of onions a year. Since 2013-14, production has exceeded demand by 4-13 lakh tonnes almost every year. In 2016-17, while production was 217 lakh tonnes, the demand (including what was exported) was 207.7 lakh tonnes, show government data.

The third advance estimate for 2017-18 projects onion production at 220.71 lakh tonnes.

Easy to store

Unlike tomatoes, onions are easy to store. The bulb stays fresh for three or four months after harvest even without a cold chain, so long as it is stored in a moisture-free environment.

Transport delays, wrong forecasts about the next sowing or harvest, and spoilage at holding locations are to blame for the fluctuations in the price of onions, says a report of the Ministry of Agriculture.

According to Pawanexh Kohli, CEO & Chief Advisor, National Centre for Cold-chain Development, “Except for the first three weeks of consumption, most of the onion produced is stored. At the farmers’ fields, we have some 40,000 structures (called jalli-walla structures) created and supplied at subsidised rates by the government. But often, the roof of the jalli structures is not sufficiently long and angled, and so water and wind spoil the onions.”

Kohli adds: “The price crash in onions, if you notice, happens mostly after the monsoon, either because the onion that was stored got wet, or because the onion that was being moving to the market in open trucks got wet. So, prices crash because of a failure in delivery, not a failure in production.” The clamour for building cold stores for onions, he says, is “foolish”. In tropical countries, he notes, onions should be stored at a temperature above 25-30 degree Celsius so that bacterial action doesn’t take place. “Just ensuring that they are stored dry is enough,” he adds.

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