Banning onion exports makes it clear farmers’ interests come last, cheaper produces for households comes first
A farmer will have the right to sell anywhere and to anyone who offers her the best price
For all the government’s talk of freeing up the agriculture sector, the ban on onion exports in the face of prices doubling in a month—thanks to a crop failure due to excessive rain—make it clear that consumer interests continue to come first. In the past too, whenever local prices have shot up, the government reaction has been to ban exports or to impose minimum export prices that, in effect, result in lower or zero exports. In other words, the government assurances that agriculture exports will be completely freed up means little; it means farmers will be free to export only till local prices remain under control.
Certainly, onion prices rising are worrying, and the government would recall an election that the ruling party lost only because of the runaway rise in onion prices. But, there are other ways to deal with the crisis that won’t hurt farmer interests. It is odd that if the government is so sensitive to the impact of rising prices on household budgets that it does not ban exports of other goods that have a much higher share in household budgets; and, in the case of goods like petrol and diesel, why not lower the massive taxes that the government collects as that will give households a lot more relief compared to what they spend on buying onions. Indeed, by banning exports and, therefore, depressing earnings from onions, the government is exacerbating the crisis as farmers will be encouraged to shift to other crops in the next season.
And, while it is true that onion expenditures are an important component of household budgets for the poor—for the population as a whole, they form a minuscule part of household budgets—why not give these households an extra amount of money to take care of the extra outgo; given the Jan Dhan accounts and the Aadhaar details the government has, transferring the money is relatively easier today.
There are other long-term solutions that haven’t been implemented either. In 2018, the government announced Operation Green with a `500 crore budget to ensure that prices of tomatoes, onions and potatoes (TOP) were kept under control; this has now been increased and other crops added to the list. The way to keep prices under control was to subsidise the cost of creating storage facilities for these crops. In addition, Nafed has, from time to time, been asked to increase procurement of onions so that, when the need arises, this crop can be injected into the market to cool prices. In addition, Icrier professor Ashok Gulati has been recommending the use of dehydrated onions for several years now; were this done, at least now, these supplies could be used to cool prices. Indeed, if onions were bought for this purpose when prices were low, this would also act as a price support for farmers. If the government has to resort to banning exports to control prices, it only shows it has learned no lessons from the past; that it hurts farmer interests, which only makes things worse.