A peek into the onion crisis clearly reveals that adequate and clear signals were available as early as May-June (last year) on the coming price shock and that these have been exploited by onion traders under a clear strategy, NCAP has stated in a report titled Lessons from Onion Crisis.
The report was handed over to the ministry of agriculture recently. The paper says that a March 2013 advance estimate indicated that onion production in 2012-13 would be 4% less than the previous year.
Private traders could understand its implications and started procuring onions in a big way by offering higher prices to farmers. Onion arrivals in markets in the three post-harvest months of the rabi crop (April-June 2013) was, in fact, 24% higher than the previous year in 32 markets, the report, authored by Ramesh Chand, director, NCAP, says.
On the huge spike in prices during September-November 2013, the report found that market arrivals in July and August were 17% and 22% lower, respectively, compared to the previous year.
This reduced supply pushed up prices in the subsequent months. Thus, the decrease in production is responsible for the increase in prices to a small extent; its predominantly due to withdrawal of onions from the market by traders, it says.
To prevent such spikes, the report suggests several measures, including constant monitoring of prices by designated government agencies, measures such as import liberalisation and export restrictions and procurement by government agencies.
Meanwhile a trader from Nashik, the hub of the country's onion trade, told FE that wholesale prices had dropped to Rs 1,000 per quintal on Friday from Rs 3,500 per quintal in November last year.
According to data from the consumer affairs ministry, retail prices have dropped across key cities. Prices are R20-25 per kg, a sharp drop from the R60-80 per kg two months back.
Onion production has risen from less than 5.5 million tonne till 2002-03 to over 15 million tonne in the last three years. In fact, production is expected to exceed 18 million tonne during 2013-14.
Produuction has seen an annual growth rate of 13.36% during the last 13 years. No other food crop in India has shown this kind of spectacular growth in recent years.