The great onion crisis that may end in tears for India's leaders

Farmers demand price rise as rains hit crop while government tries to halt food inflation

Many-layered problem: A worker next to sacks of onions at a wholesale market in Mumbai. Photo: Bloomberg
Many-layered problem: A worker next to sacks of onions at a wholesale market in Mumbai. Photo: Bloomberg

Onions in India are once more at the epicentre of a major controversy, pitting government officials who want lower prices against farmers who need extra income.

Prices of the vegetable - ubiquitous in Indian cooking - surged more than 200pc in September from previous months after flooding from heavy monsoon rains damaged crops and reduced supplies.

Please log in or register with Farming Independent for free access to this article.

Log In

That has prompted the government to ban exports and crack down on hoarding to lower prices, angering farmers, who took to the streets in protest.

The onion, whose soaring prices have been blamed for bringing down past governments, puts Prime Minister Narendra Modi in a tight spot.

During his re-election campaign this year, the premier promised to raise incomes for farmers, a key voting constituency that makes up more than half of the electorate.

Yet Modi also needs to ensure inflation remains stable, and food prices are already spiking higher.

"The government could be caught in a dilemma, as while it seeks to keep food inflation contained, it also has a promise to raise farm incomes," said Jason Yek, risk analyst at Fitch Solutions.

"Any measure to artificially depress the price of onions could spur a backlash from the onion farmers."

Get the latest news from the Farming Independent team 3 times a week.

This isn't the first time onions have taken centre stage in Indian politics. In 2013, onions were blamed for soaring inflation.

Last year, Modi said farmers are his 'top' priority, with 'TOP' meaning "Tomato, Onion and Potato".

Onion prices in India climbed to as high as 80 rupees ($1.13) a kilogram in September, compared with 20-25 rupees in July/August.

The gains are due to flooding, as well as because farmers reduced onion crops after prices fell to as little as 2 rupees per kilogram in Maharashtra in December, said Siraj Hussain, former farm secretary and a senior academic.

The government last month released onions from state stockpiles to Safal, the country's largest organised retail network of fruit and vegetables, which will also cap prices.

Authorities will monitor prices, and consider strict action against hoarding and profiteering activities. Exports of all varieties of onions are now prohibited.

The efforts have started working and wholesale prices in some markets are starting to decline, with the arrival of new crop produce from the southern region also helping to ease tight supplies, according to a government official.

Devinder Sharma, a food and trade policy analyst in Punjab with 30 years of experience in food policies, says the government is panicking over surging onion prices.

Farmers in some regions are getting paid 75pc less for their onions after the export ban was introduced, he said.

"It is the farmers who suffer in the process," Sharma said. "Farmers are being penalised to keep consumers happy.

"Inflation has to be kept low, but what happens to the millions of people that produce that food?"

Bloomberg

Indo Farming


For Stories Like This and More
Download the Free Farming Independent App