The Great Indian onion price crisis!



There seem to be two commodities that are all set to face each other in a combat mode. If on the one hand, bidding at IPL-4 is breaking and making newer records by offering otherwise affordable players, almost unaffordable bids and making them out of the reach of smaller teams, then on the other hand, an affordable and staple vegetable – the onion – is all set to make newer records with its price rise, again making it unaffordable to almost every consumer!

The prices of onions have been exponentially shooting up since December 2010, mercilessly burning the pockets of consumers at large! As per figures released by Ministry of Commerce and Industry, the wholesale price index (WPI) for food climbed up by more than 12 per cent in the first week of December 2010. Comparatively, onion prices have shot up by anywhere between 80 to 150 percent during the same period across the country.

What has been intriguing is the manner in which the government has dealt with the entire crisis! It is not that the government is not aware that the onion is an integral component of its citizens’ food baskets, and more so for the ones below the poverty line who barely survive – still, the government maintained its lackadaisical attitude towards the crisis. It is also not that the government was unaware of the fact that climatic challenges had created havoc for the crop in Maharashtra – still, the government chose not to take preventive action.

It is also not that the government was unaware of the fact that hoarders in our country await such opportunities and make a killing by further creating supply bottlenecks – still, it chose not to intervene adequately. It is also a fact that the government knows that onions have a legacy of bringing down governments – but it still chose to remain silent! So much so that in the month of November, when onions were taking more time than normal to reach the market from Nashik (due to untimely rain), the government and authorities didn’t put into place any measures to check the expected price rise. And what followed in December was bloodbath as onion shipments were reduced by almost 270 per cent, thus escalating the price by 150 per cent in a period of seven days. What is most paradoxical is that instead of tracking and acting upon real time information, the Minister for Agriculture was busy issuing export licenses, which had to be revoked immediately after the crisis! And mind you, such illogical issuing – and then cancelling – of export licenses is not new. The same was done for sugar and wheat sometime back.

It is not just about onions – the distortion in the prices of essential food commodities has been at a crisis point for a long time now. There have been numerous reports which document the kind of exponential gaps (at times, to the tune of 400 percent) that exist between the wholesale and the retail prices of essential food commodities – but no concrete action has been taken by the government. As a kneejerk reaction this time, what the ministry of agriculture did to contain the price rise of onions was to ban exports on one hand and to permit imports on the other. It did give a temporary relief, but clearly was a hasty and illogical call – as per reports, the onions that were exported to countries like Pakistan for Rs. 20 per kilo, had to be imported back at Rs. 45 per kilo! Not to forget that Pakistan too eventually had to put a ban on exporting to India.

The truth is that onions would keep burning the national pocket till the time structural changes are not made in the agriculture sector – and this is no secret, given the yawning gap that exists between production, storage and distribution! In the given environment, taking advantage of these gaps, those are the retailers who make merry perpetually, and the hoarders who wait for their pound of flesh in times of crisis! And the consumers, particularly the poor, are made to bleed at all times. Although people might debate that the production of food grains is subject to the vagaries of nature – and that nothing much can be done about it – the fact is that even after 63 years of Independence, our irrigation infrastructure is shameful!

The truth is that by now, we should have created such an irrigation infrastructure, that our dependence on nature should have been negligible! But then, the same has been a monumental failure! And similar is the state of distribution and storage infrastructure! It needs no Einstein to realize this, that taking advantage of these bottlenecks, those are the middlemen who have been exploiting these inadequacies to the fullest! And the irony in the entire episode is that while prices of crops like onions are going up by 150 percent, it is the farmer and the consumer who is losing it all. And shamefully, the government allows this to happen not once, not twice, but repeatedly!

All in all, there are no shortcuts to solving such crises. In the first place, the government had adequate forewarning that the crisis was coming, as is the case with any food crisis – since rains, farming patterns etc clearly give an early warning about food production trends. And when the crisis is around something as essential like the onion, and given the fact that the structural changes from irrigation to distribution can’t be brought about overnight, the government should have planned imports on time. With 300 billion dollars of foreign exchange reserves lying with the government and with no creative use in their mind, the least that the government could have done was to plan on spending a meager 500 million dollars on giving its countrymen onions. And in case even imports were not available, then advance warning systems should have been put in place informing civilians about the impending onion crisis and advising them on planning their food intake accordingly. But all this only after seeing to it that at least all the available stock is reaching the consumers. This time around, that itself didn’t happen. The hoarders made merry; and the government – being hand in glove with them – did nothing. Many years back, Nehru had said that every hoarder and black marketer should be hanged from the nearest lamppost. That’s exactly what the government needed to do. In the last twenty years or so, there has been no proper action against hoarders. Laws have to made and implemented where hoarders fear instant jail upon being caught hoarding essential food commodities. For hoarding, you don’t need to have a court case that lasts fifteen years. When you hoard, it’s visible. One simply cannot hide tonnes of onions below one’s pillow! There should be fear of punishment.

And with these four things in place – a totally reformed irrigation system to avoid dependence on nature, a direct access to farmers to take their produce to consumers (instead of going through layers of middlemen), a strong punishment system for all hoarders, and finally, a preplanned import structure just in case there still remains an impending crisis – we will perhaps never see another onion crisis or similar situation again.

Related Articles