The world is battling an onion crisis, prompting a World Bank warning last month, but in India prices have fallen so low that some farmers are letting their produce rot, according to growers and traders.
The Union government has stepped in, with the consumer affairs ministry on Friday asking the National Agricultural Cooperative Marketing Federation of India (NAFED), a state-run farm produce trader, to buy out surpluses from Nashik, Asia’s largest onion trading hub, and sell them in non-onion growing states so that rates would improve.
Cheap prices of onions are keeping consumers happy thanks to a glut, but horticulturists say they are getting anywhere between ₹1-2 a kg and even ₹0, after paying commissions and local market taxes.
Prices of onion, the base ingredient of most Indian dishes, are prone to volatility, with alternating cycles of gluts and scarcity. Households fret more when the bulb gets pricey, relative to other commodities.
Factors like extreme weather and inadequate or improper storage can cause supplies to go from surplus to scarce in a matter of weeks. However, when the run is good, farmers can be ruined.
Last week, horticulturist Rajendra Tukaram Chavan of Solapur, Maharashtra, the largest grower, sold ₹512 kg of onions for ₹512, or Re 1 a kg, to a local firm called Surya Trading. The firm deducted ₹514 towards rent, transportation and local levies, according to his invoice. All told, Chavan was paid ₹2 as net receivables.
Nashik, which is a bellwether market, has seen volumes double from 15,000 quintals a day in December to 30,000 quintals in recent days. The average wholesale price dropped from Rs1,850 a quintal on December 26 to ₹550 on February 23, according to market reports. One quintal is 100kg.
Growers in Rajasthan, too, said they were selling below the cost of production, which varies from state to state, usually between ₹7- ₹10 a kg.
Potato is another vegetable selling for low farm gate prices. Major producers like West Bengal, Uttar Pradesh and Punjab have seen bumper harvests. The starchy vegetable, usually priced between ₹1,400 and Rs1,500 a quintal, is going for nearly ₹350 a quintal, a crash of 76%, said Ramandeep Singh Mann, a farm expert.
On Sunday, the government said onion exports touched $523.8 million between April to December 2022. “Yet, a price collapse points to a huge glut amid slowing exports due to restrictions on export in the previous two years,” said Rahul Chauhan of IGrain, a commodities tracker.
To curb exports during shortages, the government usually fixes a rate below which traders can’t export, known as minimum export prices. Currently, there are no such measures.
The Union government has built a record reserve of 250,000 tonne of onions for 2022-23 to deal with potential spikes in prices during lean periods. It had released quantities from this stockpile to augment supplies, mostly in non-onion growing states.
