What do we blame for onion prices: Rains, cartelisation or poor policy?

With onion prices costing as much as a litre of petrol (and more), hitting Rs 100 a kilo in many parts of the country,  the government is about to float a tender to import the vegetable. The food ministry has also called a meeting with states to review prices and check hoarding of it.

Onions prices in Mumbai are at Rs. 65-70, Bangalore: Rs. 68/kg at retail prices. Wholesale prices in Delhi shot up by Rs. 1100 per quintal, causing so much alarm that the government has decided to hold a review meeting on 25 October.

The government it seems is as clueless about the rise in price as is the common consumer. Commerce minister, Anand Sharma, says the spurt in prices is because of hoarding. “The state governments must act firmly against the hoarders who are hoarding onions, which has led to artificial scarcity and sharp escalation of prices,” he told reporters.

But, Delhi Chief Minister, Sheila Dikshit, has blamed the weather Gods. “Due to unprecedented rains, the distribution of onions has been disrupted and has also affected production of the crops. These are natural forces,” she said to CNN-IBN.

Talking to Rajdeep Sardesai last night, RS Surjewala, Haryana Industries minister and a Congressman also said that the reason may mainly be because of unseasonal rains in the states of Madhya Pradesh, Maharashtra, Andhra Pradesh and Karnataka.

“Where does the onion come from at this point in time of the year? It comes from Madhya Pradesh, it comes from Maharashtra and by October it starts coming from Karnataka and Andhra Pradesh. All these four states have had unseasonal rains leading to destruction partly a destruction of the kharif crop, a fact we all cannot deny,” he said, adding, “Food inflation and its rise are a matter of great concern for the UPA and the Congress party.”

He said that while talking about the rising prices there are a few factors that should be considered:

“One, stakeholders are state governments and the central governments – the state governments have to also act in order to ensure that the hoarded onion crop – either by certain traders or vested interests is released into the marker thereby easing the price rise. Two, while UPA government has been able to contain the inflation at about 6 percent, there has been a recent increase in food price inflation which has reached levels that are of serious concern. Mr Raghuram Rajan has also said that what is required is a growth in GDP however when you do growth in GDP you reduce interest rates and you have to balance both the fiscal economy as also the growth economy. And in that sometimes inflationary pressures do come,”.

Surjewala added that the government has taken steps to rectify this. On a state level, there have been raids in Nashik in Maharashtra on various hoarders. Centrally, te government has also issued a tender for onions for about 9 lakh tonnes, which is expected to arrive by end of October-November, he said.

The government is also planning a complete ban on the export of onions from 25 October, Surjewala said.

Predictably, the BJP’s Chandan Mitra, accused the Congress and its allies of plotting this rise in onion prices, saying it is benefitting them. “This has been deliberately engineered by Congress politicians, and by Congress’ allied party politicians in order to make some money.  At this moment, I would say that they have ladoos in both their hands – on one side the hoarding has taken place and happened principally in Maharashtra and Karnataka where the Congress is in power where pet farmers are making the money and parting with a share,” he said.

Mitra said that the country is headed for another scam with onion exports from India not being banned, yet, imports being considered. “So we are in abizarre situation where on one level you are continuing to export and on another level you are saying that you are going to start importing,” Mitra said.

The Left said this was a ramification of liberalisation.

Prasenjit Bose of the CPI questioned why the government had not yet banned onion exports. “I think cartelisation is taking place because of libralisation and not because of not liberalisaing it. When onion pries were going up, the agriculture minister had said  let the prices go up, the farmers benefit – it is the middlemen. And today we have this situation. My question is, why has onion exports not been banned yet?” he asked.

“The state govts in MP, AP, Maha and Karnataka everybody is responsible and the central govt is also complicit,” Bose told Sardesai.

Onion cultivation is presently 0.99 lakh hectares in 2012-13 vis-a-vis in 2011-12 where it was 1.08 lakh hectares. It has declined by 8.33%. Onion production too decreased. In 2012-13 production stood at 166.55 lakh tonnes compared to 175. 11 lakh tonnes during 2011-12 – a decline of almost 5%. Onion storage too was 2 lakh tonnes less when compared to last year, yet onion exports saw a rise with 5.07 lakh metric tonnes more being exported this year, by the end of September.

Watch the whole CNN-IBN interview above.