With onion prices rising to Rs 65-70, the government move to import onions seems a step in the right direction. But step back a bit, and you see this is nothing but the old policy where, the moment farm prices rise, the government seeks to ensure it doesn’t happen. Indeed, the government is once again talking of the need to discourage speculative and unscrupulous traders—states have been empowered to impose stocking limits—even though it is clear the price rise is due to the 40-50% shortage of production in Karnataka due to unseasonal rains; Karnataka accounts for around 15% of the all-India crop.
Though it is not clear if imports can happen fast enough and in sufficient quantities to cool prices, if farm prices are to be dampened each time they rise, farmers are going to be wary of sowing the crop; in which case, India will remain in a cycle of farmers over-sowing when prices rise and then under-sowing as prices collapse. What is required is a policy to allow direct purchases from the farm gate—this means easing rules for FDI in food retail—and helping increase levels of processing in the industry. As more fruit and vegetables are processed, prices remain more stable. And as bigger buyers come in and buy directly from farmers, they also get a larger share of the retail price. Instead of this, the older knee-jerk policies are once again evident.