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Economy
Mahesh

06/11/23 11:24 AM IST

Why onion prices remain high

In News
  • Despite a virtual ban on exports and creation of a buffer stock, onion prices seems to show no sign of softening.
Steps taken by Govt.
  • The central government has taken repeated measures to control the price of onion.
  • In August, an export duty of 40 per cent was imposed to increase its availability in the domestic market. However, though the move throttled the export pipeline, onion continued to report escalation in prices both in the wholesale and retail market.
  •  Recently, the government fired another salvo and imposed a Minimum Export Price (MEP) of $ 800/tonne .
  • This translates into Rs 67/kg as the base price of exports. In effect, the small trickle of exports which was on for Bangladesh also came to a grinding halt.
  • These moves come even as the government has effectively formed a buffer stock of 5 lakh tonnes of onion with agencies like National Cooperative Agricultural Marketing Federation(NAFED) and the National Cooperative Consumer Federation (NCCF), wading into procuring onion at the farm gate.
  • India on an average produces 250 lakh tonnes of the bulb with the domestic consumption pegged at 160 lakh tonnes.
Reasons for price rise
  • Late arrival of the monsoon and extensive damage to the harvested crop earlier in the year is responsible for the higher than usual onion prices in the market.
  • Farmers in Maharashtra harvest their rabi onion post March, after sowing the same in December-January.
  • This onion, which has low moisture content, is amenable for storage, with the growers storing them in covered structures called kanda chawls to protect them from moisture ingress and heat.
  • However, this year, this crop was extensively damaged due to unseasonal rains and hailstorm in March.
  • Trade estimates say around 60 per cent of the onion meant for storage was damaged, and was offloaded by the farmers in April-May at throw away prices.
  • Delayed monsoon has seen delay in the transplanting of the kharif crop in June, which was supposed to hit the market by October.
  • Also the late kharif crop, which is transplanted normally in September, was delayed.
  • Thus, at present, the only available onion in the market is the stored rabi crop.
  • This severe supply chain mismatch is the cause of the present price rise. While the government has claimed to create buffer stocks, the quantity is far less than the requirement.
  • The new crop is yet to be harvested. The situation will improve only towards the end of the month when arrivals will improve.
Source- Indian Express

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