Onions travel long, costly road to table

Written by Reuters | Pimpalgaon | Updated: Jan 30 2011, 04:51am hrs
At one of country's biggest wholesale markets, 65-year-old Ganpat Sakharam Jadhav sold his 2-tonne onion harvest on a recent day at Rs 13 per kg, and he wasn't happy. A day earlier, as he uprooted the crop from his field in the heart of western India's onion belt, the price was twice as high.

I know prices will go up again once arrivals go down in the next few weeks. But by that time, these onions will rot. I will not get even a rupee, said Jadhav, separating leaves from the purple mound of bulbs in his trailer attached to a tractor.

Three days later and about 200 km to the south at a market in Bandra, Mumbai, 32-year-old Anita Fernandes bought onions harvested at the same time for Rs 40 per kg, triple what Jadhav was paid, after the produce passed along a lengthy chain of middlemen.

Country's volatile food prices have mostly risen for the past year and a half -- onion prices alone jumped 346% over 20 days last month after heavy rain wiped out cropsdriving broader inflation and adding pressure to a government that faces elections in important states this year.

The surge in prices of onions and tomatoes as well as meat, milk and edible oils underscores India's tight supply-demand balance as consumption rises on the back of nearly 9% economic growth, as well as entrenched inefficiency that adds to costs and waste.

As demand soars and people consume more, output has failed to keep pace amid political resistance to reforming a farm economy based on small holdings, reliant on monsoon rains and lacking adequate cold storage, which keeps the gap between farm gate and retail cost wide. Globally, food prices hit a record high in December. In India, food inflation has been in double-digits for most of the past year, with onionsthe most widely used vegetablecoming to symbolise the frustrations of ordinary people.

We can't avoid onions, but prices are so high that we have to reduce consumption, Fernandes said.

Governments have shied away from reforming the agriculture sector as farmers make up an big voting block. At most, authorities have tinkered with a system that analysts say needs overhauling to attract private investment.By the time Fernandes bought her onions they had changed hands four times, adding over a quarter to the cost at each stop.

Traders in Pimpalgaon, after buying onions from farmers such as Jadhav, pack them into gunny bags and sell them to a wholesaler in a place like Vashi, on the outskirts of Mumbai. The wholesaler in Vashi sells to a mid-sized vendor at Dadar in central Mumbai, who in turn sells to small vendors across the city, where people like Fernandes buy produce.

At each step, perishable vegetables and fruits are unloaded and loaded into vehicles, delaying their journey and adding to wastage, which is typically up to 30%.