No, farmers are not minting money from great onion price hike; here’s where the money is going

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Updated: December 9, 2019 1:59:05 PM

Indian farmers are still not making money from the great onion price hike even while onion prices have soared to Rs 200 per kg at some places.

Onion prices, farmers, economyThe lack of storage facilities adds to the woes of farmers as they are forced to sell their produce to middlemen to avoid rotting of the crop.

Indian farmers are still not making money from the great onion price hike even while onion prices have soared to Rs 200 per kg at some places. The majority of the end consumer price is taken by middlemen and not farmers, and the agrarian community is still on the losing side despite onion rates touching sky highs. “It is well-appreciated farmers bear more of the loss when prices fall and receive less of the profit when prices rise. The exact margins could vary depending on the crop and the corresponding supply-chain dynamics,” Sreejith Balasubramanian, an economist at IDFC AMC, told Financial Express Online.

While the majority of the money is taken by middlemen, the lack of storage facilities adds to the woes of farmers as they are forced to sell their produce to middlemen to avoid rotting of the crop. “Given lack of robust supply-chain related data, middlemen make most of the gain,” Sreejith Balasubramanian added.

What can the govt do to help farmers?

The government intervention is seen when prices hike and not when they fall. Calling this ‘asymmetric government intervention’, Balasubramanian said that this potentially makes farmers’ problem worse. “The permanent fix does not lie in ad-hoc measures like export bans, higher imports and stock limits. In fact, long-term solutions are the ones often talked about and include better & widespread storage solutions, storage of onion-extracts vs. raw onions, etc. to stabilise prices around the year,” he said.

Onion prices have been trading high for some time now and according to media reports, rates have breached Rs 200 per kg mark in some areas. Several factors have contributed to the same including hoarding by middlemen, late monsoon rains resulted in lesser sowing of crops and then rotting of crops due to flood in Maharashtra and Karnataka. The government, in the meanwhile, has deployed several measures to keep the prices in check. This includes importing onions from Egypt and Turkey, banning exports from the country and stock limits are also in place to avoid hoarding.

Meanwhile, the onion prices are expected to remain high until February 2020 as fresh produce from Gujarat will only be available after mid-January and the same will stabilise the prices by February, Sreejith Balasubramanian had told Financial Express Online earlier. In RBI’s fifth bi-monthly review, the central bank said that “upsurge in prices of vegetables is likely to continue in the immediate months”, adding that the arrival of late kharif produce will soften the prices by early February 2020.

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