FE Editorial : The price of onions

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The Financial Express: Feb 05 2013, 03:10 IST

Given the electoral significance of onions—the BJP lost the 1998 Delhi assembly elections as retail prices touched Rs 100 a kg—it is commendable that the government is behaving in a responsible manner and is not either thinking of introducing a ban on exports or even putting a minimum export price, something considered quite usual in the past, and not just for onions. While onion prices have risen to around Rs 35-40 per kg at the retail level today from around R15-20 in December, there are several differences between 1998 and today. For one, per capita incomes are around 4.5 times higher, making the impact of any price hike that much easier to absorb. Two, while the expected shortage in the crop, once the late kharif onions come in, is expected to be around 1-1.5 million tonnes, that’s a drop of around 6-7%. As compared to this, onion production fell 15% in 1998. But, and this is the important lesson, thanks to the price signal farmers got in 1998, supplies rose a whopping 47% the next year—bans on onion exports, or anything that mutes the price signal, it is important to note, depresses the supply response and actually makes things worse.

Whatever the reason for the muted government response, this has important ramifications for India’s agricultural exports. As the adjoining column points out, agricultural exports can touch $42 billion this year if the government stops its on-off policies towards farm exports—while agricultural exports are expected to grow 13.5% this year, keep

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Narendra M Apte | 05-Feb-2013Reply | Forward

Whether it is onions or any other perishable vegetables, the market is an imperfect market leaving scope for price manipulation by the wholesale market brokers and this is what hurts consumers more than anything else. In case of onions, since their shelf life is better than some vegetables, there is definite scope for research to do research for growing a variety which grows in regions other than those States where it is manly grown. That will be a big step in agricultural research. Processing of agri-produce has enormous scope in India and consumers and farmers will both beneficiaries from this activity.