If sky-rocketing onion prices are giving poll jitters to the Congress-led governments at the Centre and in Delhi, the UPA government has no one but itself to blame. In August, the government exported nearly 30,000 tonnes of onion when people across the country were literally shedding onion tears, buying the kitchen staple at Rs.70-Rs.80 a kilo.
The export came despite a supply crunch in the market at that time. In fact, the government had imposed a minimum export price (MEP) of $650 per tonne in the same month to restrict shipments in a bid to rein in prices. But despite tell-tale signs of a crisis, it did not put a ban on exports.
Govt's failure
Ironically, the National Agricultural Cooperative Marketing Federation of India (NAFED) floated tenders in August for importing onions from countries such as China, Pakistan and Iran.
The consumer may be paying the price of this logic-defying policy now, as prices continued to sell at Rs.90 to Rs.100 per kg on Thursday - and parties may have to pay a political price in the coming elections.
Another front where the government seems to have failed completely is in controlling the unscrupulous trader lobby. Experts say that in spite of a dip in production - caused by unseasonal rains that destroyed crops in Maharashtra - onions prices should not have exceeded `60 per kg in retail markets. But they are going through the roof because of price manipulation by the traders who buy onions from farmers.
Each day hundreds of quintals of onion land up in Lasalgaon, Asia's largest onion market, where traders buy stocks in auctions.
The average price in Lasalgaon even today is in the region of Rs.4,000 to Rs.4,500 per quintal. At this rate, the maximum retail rate in Mumbai should be Rs.45- Rs.50 a kilo.
Manipulation
But it doesn't work that way because traders manipulate the prices (see box). "Most of the onion crops in the market are sold by farmers in the region of Rs.4,000- Rs.4,500 per quintal. But one particular consignment goes up for Rs.5,600-Rs.5,800 per quintal. This is deliberately done because after purchasing at this price, the traders set this price as their benchmark and then sell their entire stock at these rates," said C.B. Holkar a member of NAFED, which is a farmer's co operative.
According to Holkar, despite this the prices in retail markets should not be higher than Rs.70. "However, if onions are being sold at higher rates, that's because traders buy from farmers and sell their stocks to other traders. These traders then sell it to small wholesalers and from there it comes to retailers. At each step, the price goes up Rs.5 to Rs.10," he said.
The Chairman of the Lasalgaon Agricultural Market Produce Committee (APMC), Jayadutt Holkar, also held the trader lobby responsible for the increase in prices.
"For the last few days, the average rate of onions sold here is the region of Rs.4,000-Rs.4,500. Only a few quintals are purchased by traders at Rs.5,600-Rs.5,800 and above," he said.
Solution
"Yet, the traders are using this higher rate as the benchmark to sell their entire stock. So, they are fooling both the farmers and the consumers," he added.
According to him, the only solution is that state governments should directly buy onions from the market and sell it to the people.
This is what the Delhi government seems to have finally decided to do - a decision it should have taken earlier.
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