Onion prices: Will Congress's tears of pain be BJP's tears of joy?

You make us cry without hurting us, says Pablo Neruda in his Ode To The Onion. But Indians know Neruda is wrong for they have learned from experience that onions can hurt a lot. Politicians would know this better. How can they ever forget the famous 1998 elections when the BJP bit the dust due to sky high onion prices in Delhi?

It is dj vu as elections are nigh and the onion prices are flying. According to a Times of India report, the central government has blamed hoarders for the spike in onion prices. The prices, after a recent sharp dip, are back up at Rs 70-80. Media reports said prices at wholesale Lasalgaon market, Maharashtra, the largest for the bulb in India, hit Rs 5,300 per quintal on Monday.

The ToI report says the arrivals in the market halved to 3,000 quintals on Monday due to sudden rains. The report says the Centre has said that traders and speculators may be artificially increasing the prices exploiting the a seasonal shortage.

Reuters

Reuters

If the humble onions have crumbled the high and mighty politicians, it is actually their own doing. The problems with the onion market in India are nothing new. In fact many research reports and studies have pointed out the issues time and again.

According to an earlierPTI report, a study commissioned by the Competition Commission of India had in December 2012 found that the market was dictated by traders and had clear imperfections including cartelisation and hoarding that impacts price of the agricultural commodity.

The role farmers play in price discovery is minimal due to low size of average farm holdings, in the range of 1.15 to 1.3 acre, unfavourable weather conditions and price risk.

"Most of trading is in the hands of commission agents and traders... Lack of trading expertise, market knowledge and risk bearing capacity has prevented most of the farmers to make any dent in onion trading," said the study conducted by Bangalore-based Institute for Social and Economic Change.

According to a report by National Council for Applied Economic Research cited by the Hindustan Times today, farmers hardly make Rs 5 to Rs 8 a kg, with the wholesaler adding 10-15 percent and retailer gaining the most with a mark-up of 20-25 percent.

The problem with India's vegetable markets is a faulty supply chain, wobbly export policies of the government and inadequate storage facilities.

The Agriculture Produce Marketing Committees have turned into network of profiteering traders, who jack up prices. These committees whichshould have helped farmers and consumers end up doing just the opposite.

As an item used by the rich and the poor alike, the effect of these on onions is more visible.

After the 1998 onion crisis that taught the BJP a lesson or two, onion was included in the essential items list. This allowed the government to control the export of onions. It was taken off the list in 2004.

The vegetable has witnessed major price swings ever since, with the government adjusting its policies to suit the prevailing market conditions. For example, in 2010 December, when the prices surged to hit record highs before this, the government banned exports and allowed imports of Pakistani and Chinese onions.

There are talks that the government may again resort to the similar steps to deal with the present situation. According to a report in the Business Standard, the government is planning to increase minimum export prices of onions to $1,000 per tonne from $650 now. The aim is to curb exports. Another short-term solution.

So, the crux of the problem will remain unaddressed.

Meanwhile, onions-the "luminous flasks" that cut across class barriers-will continue to symbolise the Indian political class's apathy towards its people, the profiteering traders and the always loss-making farmers.

And this time round onions will likely give the BJP a chance to take sweet revenge on the Congress, as this report in the BS says. The Congress's tears of pain will be Narendra Modi's tears of joy.