Maharashtra, the major producer of onions, is in dire need of such hedging mechanism to cover the risks. Onion supplies from this state have been hit severely in the last six months due to the erratic monsoons that damaged crops. And with the rains staying on, the new crops have also been affected adversely. This has pushed up the prices of onions to dizzy heights of Rs 80 per kilogram. But the acute onion shortages faced by the country is largely due to hoarding by merchants and this where the futures trading plays an important role, says a leading merchant at the APMC wholesale market of New Mumbai.

Even VK Agarwal, chairman of Forwards Market Commission (FMC) while addressing the delegates of Globoil India '98 recently said that though the government has not accepted the recommendation to allow futures contract in onions,it would certainly think positively if one of the commodity exchanges came out with a proposal to introduce it.

Traders were of the opinion that the crop which is highly sensitive to vagaries of nature will provide a respite to all concerned as it will help stabilise the market even in adverse conditions.

Kamal Nayan Kabra, who had headed the committee on futures trading in commodities, had in a recent statement said that formation of growers' co-operatives in agricultural produce was essential before introducing futures trading in these commodities.

The point to be noted, in the case of Maharashtra, is that the state has growers co-operatives at grass-root levels facilitating immediate introduction of futures trading leaving no scope for exploiting farmers by middlemen. Hence futures trading in onions, if introduced, could take off the day it is permitted, opine experts.

Besides, futures trading in onions would prove to be successful as normally they are never in short supply, the current year,however, an exception. Futures would lead to price stability and also discourage hoardings even if a commodity is in short supply.

This is primarily due to trading obligations at contracted rates, traders said.

Moreover, India also exports onions through the National Agriculture Federation (Nafed) and futures trading would facilitate the entire process and will eliminate the bungling between the government and the agency on changing the export prices depending on the domestic supply. This would lend stability to Indian onions in the international market as exports of onion make up 90 per cent of India's vegetable shipments and brings in over rs 300 crore annually.

Earlier, Nafed had, opposed any ban on onion exports as it was of the view that it could damage India's standing in the global vegetable market and had instead agreed to raise prices.

India's market share could be taken over by other nations if exports were banned and it would take considerable amount of time to build a market again, Nafedhad contended with the agriculture ministry in a note pleading against the ban.

Pakistan, Sri lanka, China, Iran, Egypt and Holland to an extent compete with Indian onions in the global market.

Traders said onion exports between July and August were only one-third of last year's shipments and therefore, exports were not the reasons for the high onion prices at home.

However, the Nafed move on hiking the export price for onions, was being seen as a balancing act to keep the export potential alive and also meet domestic demand.

The fact remains that there have been crop failures in the country due to unseasonal rains before and after the monsoon period June-September, as a result there have been several cases of hoarding that have further boosted the onion prices.

Unseasonal rains during the sowing season had no doubt ruined the chances of cheap vegetables including onions, but hoardings have taken the prices much beyond realistic levels, they added.

Major supplying centres Nashik, Pune, Sangli andKanpur as well as other growing centres around Mumbai have started despatches of new crop, traders said and the prices are seen easing.

Onion is grown in three phases in a crop year starting October or the kharif season.

It is grown between October-December and January-February and thereafter in the rabi crop during April-May.