India's onion market, dictated by traders, has clear imperfections including cartelisation and hoarding that impacts price of the agricultural commodity, a Competition Commission of India (CCI) study has said.
There are "clear imperfections in the onion markets and presence of interested cartels", it said.
Bangalore-based Institute for Social and Economic Change conducted the study for fair trade regulator – Competition Commission of India (CCI). The report, which looked at competitiveness in major onion markets of Maharashtra and Karnataka, was submitted to the regulator in December.
"Results of seasonal indices, correlations, daily, monthly arrivals their prices etc. indicated existence of anti-competitive elements in the onion markets.
"A few big traders having well connected networks with market intermediaries in other markets seem to play a major role in hoarding for expected high prices," said the findings, released recently.
According to the report, market structure of onion is unilaterally dictated by the traders, not farmers. Minimal role of farmers in price discovery due to low size of average farm holdings - 1.15 to 1.3 acre, unfavourable weather conditions and price risk are cited as major reasons for the situation.
"Most of trading is in the hands of commission agents and traders... Lack of trading expertise, market knowledge and risk bearing capacity has prevented most of the farmers to make any dent in onion trading," it noted.
The report stressed that changes in onion prices have a huge impact on the food security, farmer and consumer welfare.
"Factors like significant marketing costs, lack of market infrastructure, control of trade in the hands of few traders, restricting entry for new traders, often strikes by market functionaries, etc. can also responsible for high prices of onion," it said.
During the agricultural year 2011-12, onion was grown in an area of 1.04 million hectares with a production of 15.75 million tonnes.
The study has also suggested various measures to improve the overall functioning of onion markets.
"To avoid collusion between traders, involvement of Agriculture Produce Market Committee (APMC) officials in the auctioning process should be mandatory. Besides, co-operative marketing societies must be encouraged so as to prevent collusion amongst traders," it said.
"Onion is one of the most market sensitive commodities that creates ripples in the trade as also political circles.
Its significant position in the diets across all income groups and an important ingredient in many Indian recipe causes wide ranging effects of any significant price change," the report said.