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Saturday, February 22, 2014

falling Onion prices ..easing inflation and SC banter ....

Empires have fallen when people agitated and agitations have taken places for marketplace issues !

During Oct 2013, it was ‘Allium cepa’ – the bulb onion that was embattling the Central Govt ~  onion prices, defying the sharp dip in the rates in the country's biggest wholesale market at Lasalgaon in Nashik, continued to spiral and touched the Rs 100 per kg mark - making the Govt panick-stricken. Food minister K V Thomas rushed to Maharashtra as the Congress-ruled state accounts for 28% of the total onion production  to try and crack down on hoarders. Commerce minister Anand Sharma blamed hoarders for the spike in onion prices which political rivals painted as the UPA government's failure, and worse, insensitivity towards the poor. The Congress government in Delhi, which rode the onion anger to power in 1998,  was keen to shift the blame on its political opponents.  Political statements flew with some suggesting that exports be banned as well.  Even as they blamed the farmers for keeping the stock, it was public knowledge that it is the middlemen who control the market.


A casual online check today [21.2.2014] shows Onions Big @ Rs.9 per kg and Small Onions at Rs.25 per kg….. not sure how much they cost in local market. Onion prices cooling off as much as 300 per cent in January helped India's wholesale price-based inflation ease to an eight-month low,  recent government data reveals. Onion inflation has fallen to a little over 6 per cent in January after touching 336 per cent in September last year and is at a near one-and-a-half year low. The wholesale price index (WPI), long regarded as India's main inflation measure, rose 5.05 per cent last month, compared to a rise of 6.16 per cent in December.  However, core WPI inflation inched up to 3 per cent last month, which analysts said was its highest level since April 2013, which is likely to have Reserve bank of India (RBI) Governor Raghuram Rajan worried.

Meantime newspaper reports suggest that the minimum export price for onion may be slashed by another $10-15  a tonne.  This reportedly is a fallout of the falling onion prices in the wholesale markets of Maharashtra. While the ministry of agriculture had suggested for complete removal of the MEP to facilitate easy exports, department of  consumer affairs have strongly opposed it stating that it will not only push up prices in the domestic market  but it may lead to unfair trade practices. According to consumer affairs, one of the reasons for the abnormal hike in onion prices some time back was uneven distribution in the domestic market. Reports from states suggested that there has been large scale hoarding to export rather than supplying in the domestic market  as exports  were profitable, said an official source. Currently, the  wholesale onion prices in Maharashtra are between Rs 8 a kg to Rs 10 while the retail prices are in the range of Rs 20 a kg to Rs 25.


Bangladesh is one of the prime buyers of Indian onions. Although Pakistan, Iran and Egypt are competing with India, the exports have increased substantially after the reduction in the minimum export price (MEP) to $150 a tonne.  If one could recall there was the Onion crisis in 2010 caused by errant rainfall in the onion producing regions which led to a shortage of onion production. The crisis caused political tension in the country and was described as "a grave concern" by Prime Minister Manmohan Singh.

Naturally so as onions are considered an indispensable ingredient of most Indian cooking, providing the pungent foundation for a thousand different curries and other dishes. That time, wary of historical precedent, Prime Minister Manmohan Singh and his government responded forcefully by banning onion exports, lowering import taxes and by getting in shipments of onions from neighbouring Pakistan.  The opposition parties blamed the crisis on policy decision on exports and imports of the ruling Congress.  The shoppers at various markets agree that Indian onions are the world’s tastiest but are fed up with price swings.

To conclude, here is something excerpted from an interesting report in India Today in Jan 2014……..  The Supreme Court doesn't just have to deal with complicated Constitutional issues, major scams and other important cases; novelty is the spice of every day in the life of the apex court. But it doesn't just grin and bear with everything. On Friday, it sternly declined to entertain a Public Interest Litigation (PIL) seeking direction to the government to regulate the prices of onions and other vegetables.  To add light banter to the buncombe, a bench headed by Justice BS Chauhan told the petitioner staccato, "Stop eating onions, prices will come down." On a more serious note, the court told the petitioner that it should not be burdened with such public interest suits.

Union Law Minister Kapil Sibal had blamed the high prices of onions on BJP's PM candidate and Gujarat Chief Minister Narendra Modi. Sibal said people suffered a shortage of onions as the Modi government had handed over huge tracts of land in Kutch, which accounts for a big part of the onion crop, to the Adani Group. The truth was found to be otherwise. In Gujarat, onions are grown in Saurashtra, not Kutch, and the land given to the Adani Group is arid where nothing is grown.

With regards – S. Sampathkumar

21st Feb 2014.

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