Why are Onion Prices Rising?

What’s in today’s article?

• Why in news?
• Production of Onion in India
• News Summary: Why are onion prices rising
• Why are onion prices on the rise?
• What has export to do with the present price rise?
• Will this step ensure lower prices?

 

Why in news?

• After a long slump, onion prices are again on the rise, causing concern for the central government.
• As a result, the Ministry of Finance imposed a 40 per cent export duty on onions. This led traders to close onion auctions indefinitely in Nashik district, Maharashtra.

 

Production of Onion in India

• Background
  • India is the second-largest onion-growing country in the world. The Indian onions are famous for their pungency and are available round the year.
  • Indian onions have three crop cycles. The choice of season depends on the region's climate and the onion variety being cultivated. Onions are more commonly associated with the Rabi season.

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• Varieties
  • India cultivates various onion varieties, with the most common ones being red onions and white onions.
  • There are certain varieties of yellow onion which are suitable for export in European countries.
• Cultivation Practices
  • Onions are primarily grown through seeds, although bulb-to-bulb planting is also practiced.
  • The crop requires well-drained soil and is often cultivated in sandy or loamy soils.
  • Adequate irrigation is essential, and farmers may use drip irrigation systems to conserve water.
• Onion producing states
  • The Major Onion producing states are Maharashtra, Karnataka, Madhya Pradesh, Gujarat, Bihar, Andhra Pradesh, Rajasthan, Haryana and Telangana.
  • Maharashtra ranks first in Onion production.
• Export
  • The country has exported ~2,525,258 MT of fresh onion to the world, worth Rs. 4,522.79 crores/ 561.38 USD Millions during the year 2022-23.
  • Major Export Destinations (2022-23): Bangladesh, Malaysia, UAE, Sri Lanka, Nepal and Indonesia.

 

News Summary

• Prices of onions have seen a steep rise since the start of August.
• At Lasalgaon’s wholesale market in Niphad taluka of Nashik, the average price of the bulb has risen from Rs 1,370/quintal on August 1 to Rs 2,050/quintal on August 19.
• In contrast, back in March-May, onion growers faced financial distress, when their produce was sold between Rs 500/quintal and Rs 700/quintal.

 

Why are onion prices on the rise?

• The present price rise has two aspects to it: first is the shortage in stored produce; the second has to do with lower-than-expected acreage of the bulb itself.
  • Unlike other vegetables such as okra or beans, onions are not grown around the year.
• The fallout began last year when the country saw a dip in onion acreage.
  • The Crop and Weather Watch Group noted that as against the 3.76 lakh hectares target for onion, the country had seen sowing over 3.29 lakh hectares.
• The situation worsened due to the damage to the Rabi crop in March–April, when most onion-growing states, including Maharashtra, saw unseasonal rain and hailstorm.
• Also, farmers, who generally offload their Rabi onions only post-June, were forced to do so from May itself because of quality concerns of the stored produce.
• Therefore, the month of May saw increased arrivals which along with inferior quality saw a price crash.
• The Maharashtra government had in March announced a special scheme to support onion growers with a subsidy of Rs 300/quintal. Most farmers said the scheme is yet to reach them.
• As a result, the supply-demand mismatch has resulted in the present price rise.

 

What has export to do with the present price rise?

• The domestic price rise comes at a time when demand for Indian onion in the international market has been quite high.
  • The majority of the demand is from Bangladesh and West Asia.
• With a 40 per cent export duty, the price parity of the trade will be destroyed.
  • Many traders had already signed contracts for exports at a lower price and this duty would have to be incurred by them.
  • Around 4,500 tonnes of onion is in transit for which the exporters would have to suffer the losses.
• Increased export duty, the government feels would stem the bulb from leaving the country and would allow more availability in the local market.
• This will ensure smoother supply and lower prices.

 

Will this step ensure lower prices?

• To some extent, a price correction is possible. However, the larger concern that traders and farmers point out is the moisture stress the Kharif crop is under.
• India has reported 1.05 lakh hectares of Kharif onion. The crop is under moisture stress with rains being absent from the first week of August.
• In case the monsoon does not revive soon, the Kharif crop might not be able to meet the demand of the market in the days to come. This, in turn, will lead to price rise.

 

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Q1) What are rabi crops?

Rabi crops are a type of crop in India that are sown in the winter season, typically between October and December, and harvested in the spring, generally from April to June. These crops are dependent on the winter rains, known as the "northern monsoon" or the "winter monsoon," and are a crucial part of India's agricultural calendar. The term "Rabi" is derived from the Arabic word for spring.

 

Q2) What are the different varieties of onions?

Onions, a staple in kitchens worldwide, come in a variety of forms, each offering a distinct flavor profile and culinary utility. The diverse spectrum of onion varieties caters to an array of taste preferences and culinary creations. From the pungent and versatile Yellow Onions to the vibrant and mildly sweet Red Onions, the onion family delivers a spectrum of flavors and textures that enhance dishes across cultures.

 

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Source: Why are onion prices rising? | APEDA