Onion Price: The Great Indian Tearjerker

Written by Partha Sarathi Biswas | Updated: Aug 26 2013, 23:05pm hrs
Onion priceOn an average, small and medium-scale farmers invest Rs 30,000 -40,000 on each acre of land to yield around 150 quintals of onion.
Travelling from the drought-hit Satana taluka of Nashik district in Maharashtra and the Agricultural Produce Market (APM) in Chandwad is both gruelling and costly. Gruelling, because of the lack of proper roads along the way, and costly because it involves at least Rs 1,000 spent on tractor fuel. But Vikas Gulecha, who has cultivated onions on his five acres of land, is hopeful that the 40-km trek along untarred and pothole-ridden roads will bring him good news. I took a loan of nearly Rs 5 lakh this year. Hopefully, I'll get at least Rs 4,000 per quintal for my produce and manage to pay off most of it, he says.

At the market, his crop fetches him a price of Rs 3,300 per quintal, more than what he made in May, when he earned only Rs 1,500 per quintal, but not enough to pay off his debt. Gulecha has heard news of onions selling for Rs 80 a kg in metros, but cannot fathom how a crop that barely manages to earn him Rs 30 per kilo at the local APM can command almost triple the amount by the time it reaches the vendor in metros around the country.

On an average, small and medium-scale farmers like Gulecha invest Rs 30,000 -40,000 on each acre of land to yield around 150 quintals of onion. The crop is sown and harvested thrice, and the harvest in September normally has reduced yield due to rains and other climatic conditions. Since the beginning of this year, onion prices have almost doubled to what they were last year. As onion prices across cities hover between Rs 50-Rs 80 a kilo, the invariable problem that is being cited low production is strongly refuted by the farming community. Instead, they say that a vicious cycle of internal trading is resulting in an artificial escalation in the price of onions across the country. On August 10, a particular tractor was auctioned for Rs 5,000 per quintal at the Nagpur APM. Within a few hours, the news spread like wildfire and by evening, vegetable shops in Delhi and other cities were selling onions at Rs 80 per kg, says Deepak Pagar, another farmer.

The auction Pagar mentions is the key determinant in the price of onions. It is held at the APMs across the state, where farmers bring their ware for the traders (or the first rung of middlemen) to buy. To ensure fair pricing, this is done through open auctions in which traders bid on per quintal of the produce, after inspecting the onions, which are brought to the market either in tractors or trailers or small tempos. Before the start of the auction, the tractor or the trailer carrying the produce is weighed on the scales of the APM. On an average, a tractor can bear 20-30 quintals of the produce. Traders invariably reduce the price if the crop is brought in a tempo, on the ground that a tempo cannot be weighed on the scales at the market. This automatically puts small-scale farmers, without a vehicle of their own, at a disadvantage.

Although on paper, this process is above board, Pagar and other farmers claim the stakes are heavily tilted against them. Auctions are controlled by a coterie of traders who vary the prices at will. The APMs, formed to ensure transparency and fair practices, have failed to address the grievances of farmers, says another farmer Dinesh Jadhav. In particular, the farmer is often left to bleed as there is no minimum support price (MSP) for onions. In its absence, bids called by traders are open to manipulation, which in turn are responsible for the wild speculation in the market.

Since early 2000, onion production in India has seen a significant spurt, increasing per hectare yield handsomely. But the APMs have refused to update arcane laws governing the sale of agricultural produce, giving rise to trade cartels that maximise their own profit. Jaydutt Holkar, president of the Lasalgaon Agriculture Market Committee the largest and most important market for onions in Asia lays the blame squarely on the traders. It was just a single tractor of one particular farmer which got the price of

Rs 5,000 per quintal at the Nagpur market. None of the other farmers got prices more than Rs 3,000-4,000 per quinital the same day. This was a clear case of internal fixing, he says. Just days after the abnormal hike fueled speculation over the paucity of crops in storage, the prices of onions slumped to

Rs 3,000-Rs 2,500 at Chandwad.

Price of onions continue to be volatile in India because of the stranglehold of middlemen on the system. For instance, the price a farmer gets in hand is not inclusive of the commission taken by traders, which ranges between 6-10 per cent. This is ostensibly for handling and storage charges. Often the traders do not pick up the produce for a few days. When they come for the crop, they again reduce the price as they claim the weight has gone down, says Dadaji Shevale, another farmer in Chandwad.

Being a perishable commodity, the trading community counters, loss in transit is unavoidable. Other than packing, transportation, commission for the agents of the APM, there are other costs which the crop has to encounter before it goes out to the market. With diesel prices skyrocketing, we have to shell out Rs 500 for transportation of the crop from the APMs to the wholesale markets. We also have to pay 6-7 per cent to the commission agents at the wholesale markets. On an average, if we buy onions at Rs 3,500 per quintal, by the time it reaches the wholesale markets, the price of the produce, including our cuts, increases to Rs 5,000 per quintal. These days, without any steady supply and increase in demand, the prices are touching Rs 6,000-7,000 per quintal, says a trader in Chandwad.

This year, the traders say, the price hike is due to the reduction in production as major parts of the onion growing region of Maharashtra were hit by drought. However, Holkar and other farmers deny this. There was a marginal decline in production, but it cant substantiate the stupendous price rise, he says. Over the last two weeks, supply has picked up steadily, bringing about a marginal decrease in price.

The journey of the onion from the farm to the wholesale market is four-pronged, with the traders and the commissioning agents holding maximum clout over the process. Govind Pagar, district president of Swabhimani Shetkari Sangthana, the farmers party by MP Raju Shetty, says, the maximum and minimum price of the crop paid to the farmers has ranged between Rs 100- Rs 450 per quintal in the last three years. There have been cases of farmer suicides in Nashik over the issue of onion price, but no one is ready to look into the problem, he says.

If farmers are at the receiving end of traders, in the cities the commission agents act as the conduit between the traders and the retail suppliers. BS Dighe, a commissioning agent in the Gultekdi wholesale market in Pune, says, Instead of an auction, we charge 6 per cent of the total price of the goods as our fees. This fee covers the handling, storage and other incidental charges before we sell the goods to the wholesale markets. The rate of selling is fixed by the APM Committee (APMC), he says.

For better payment, farmers have now started visiting more than one APM with their fare, even if they see little success. Roopsinh Solunkhe, a farmer in Malegaon taluka, is one of them. My 14-year-old son wants a cycle to go to school. A few days ago, when news of the Rs 5,000 per quintal sale broke, I took a portion of my produce to the Manmad market. But I could only get a rate of Rs 2,500 per quintal. At Chandwad, things were slightly better. I got Rs 3,785 per quintal for my produce. If the prices are going up as they say, I could surely use that money to pay off my Rs 4 lakh loan and save something for my children, he says.