The Asian Voice

Lessons from India's onion price crisis: Statesman contributor

In his article, the author says that the non-availability and unusual price hike of onions have led to a crisis.

Labourers fill a bag with onions as farmers and traders negotiate prices at a wholesale vegetable market in Chennai, India, on Feb 1, 2020. PHOTO: AFP

NEW DELHI (THE STATESMAN/ASIA NEWS NETWORK) - The price of onions - a significant factor behind the ballooning food inflation - appears to be abating; but the portents of the recurrent crises still persist.

The underlying reasons have not been addressed. The knee-jerk reactions, such as onion imports and export bottlenecks, are no solution to the deep-rooted problem.

The high prices do not lead to higher farm incomes. While the people at the bottom of the pyramid can't afford to consume onions, the unscrupulous traders and hoarders make a windfall in the time of crisis.

Finance minister Nirmala Sitharaman told the Lok Sabha recently that she comes from a family which doesn't have much to do with onions. She is not alone.

There are many more in India who do not relish, rather loathe onions.

Still, there are many among the Hindu upper castes who treat onions and garlic as food items that can result in depression and inertia, and thus and avoid eating them.

The Jains exclude onions, garlic and other root vegetables for a similar reason.

In the seventh century, the Chinese traveller, Huen Tsang wrote that people in India did not eat onions and those who ate were expelled beyond the town walls.

Not that aversion to onions was once a worldwide phenomenon. On the contrary, onions were regarded as a precious, even sacred, item.

For instance, Egyptians believed that the onion was a symbol of eternity and an object of worship because of this vegetable's circle-within-a-circle structure. They used to bury onions along with their Pharaohs.

Similarly, onions were gifted at weddings in medieval Europe. But perceptions have drastically changed; the debate on the onion's profanity or sacredness is no longer relevant.

As a matter of fact, the overwhelming majority of Indians not only eat onions; it has become integral to their staple diet.

Its non-availability and the unusual price hike have led to a crisis. Onions are above partisan politics.

High onion prices in 1979 helped the Congress-I to make it a poll issue in the 1980 elections. Indira Gandhi returned to power after the party's 1977 poll debacle.

So did the 1998 onion price crisis affect the Bharatiya Janata Party (BJP) governments in Delhi and Rajasthan.

The hikes in 2010 and 2013 had confounded the Congress- led United Progressive Alliance (UPA) governments.

One major lesson that the politicians should learn is that when people actually feel the effect of the government's inefficiency, they will hesitate to teach a lesson to whichever party is in power.

That is exactly why the dangerous macroeconomic indicators figured out or correctly predicted by the economist do not change the voting behaviour until the masses actually feel the pinch, as they did with high onion prices.

So, the governments cannot afford to wait until the palpable impact of inflation hits the people, most particularly unemployment. The present onion crisis with the ballooning prices reaching Rs200 (S$3.88) and above a kilogram cannot be regarded as a temporary problem.

Crop and market failures have affected the Kharif harvest season (October- December).

More so now, when the economic growth is slowing down and when the retail inflation was at a five-year high of 7.35 per cent in December 2019.

The food inflation has reached 14.12 per cent, against the dismal 2.65 per cent in the same month last year.

High prices of onions and other vegetables accounted for 60.5 per cent of food inflation. The ground realities need to be examined in the context of onion prices.

Is onion production in India terribly low? No, not below the demand, although it may be less than the need.

Business enterprises, the governments which think business is not their business and their supporting economists are worried only about the demand, not the need.

In simplest terms, demand is the need plus the purchasing capacity. Millions of poor who cannot afford to buy enough onions cannot add to their demand.

Maybe that is why in 1998, the Delhi Chief Minister Sahib Singh Verma said: "in any case, poor people do not eat onions".

It is another matter that these comments cost him his job. Excluding the needs of the poor who have no means to buy, the estimated annual onion demand in the country is 15 million tons against the production of more than 23 million tons.

Onion production has increased by about 40 per cent from 16.81 million tonnes in 2012-13 to 23.48 million tonnes in 2018-19. After all, India is the second-largest onion producer in the world, after China.

It accounts for 19 per cent of the world's onion production.

So, the disruption in production during one season every three or four years should not pose a big problem only if the effective storage and distribution systems can be put in place.

Explaining the current onion price crisis, the Consumer Affairs, Food and Public Distribution Minister Ram Vilas Paswan said (his reply in Parliament on December 11) that prices have increased by over 400 per cent after last March.

"During 2019-20, there was a 3-4 week delay in sowing as well as a decline in the sown area of the Kharif onion because of the late arrival of monsoon. Further, untimely and prolonged rains in the major growing states of Karnataka, Maharashtra and Madhya Pradesh during the harvesting period caused damage to the standing crops in these regions", the minister said.

True, excess or deficit rainfall are the major reasons why the government has no control. This is not wholly unrelated to climate change.

But the excuses cannot hide the failure of the governments in the areas under its purview - the demand forecast and demand-supply management, storage and distribution infrastructure arrangement which apply not only to onions but to fruit and vegetables as well.

The rising prices do not give a commensurate income hike to the onion farmers at least temporarily. The traders and middlemen are making the most out of it.

The lower quantity of production due to bad monsoon conditions reduces the farmers' total revenue although the product price increases marginally.

Thus, the loss to the farmers continues while consumer prices increase. The right solutions to the recurring problem of onion price shocks entail the correct recognition of the real causes of the crisis.

Three important areas need immediate focus. One, onion production is concentrated only in a few states while consumption need and demand is countrywide.

Five states, Maharashtra, Karnataka, Madhya Pradesh, Guajrat and Bihar account for about 75 per cent of onion production with Maharashtra alone accoun ting for more than 30 per cent.

If Andhra Pradesh and Telangana are added, 80 per cent of the onion production originates only in seven states.

So, production should be encouraged in other states wherever it is feasible.

Two, the storage facility is too inadequate, only to the extent of some 20 per cent of the crop, whereby 30 to 40 per cent of the onion produced is lost in course of bad storage.

Governments cannot continue to ignore the situation, without any corrective measures. Three, the middlemen and hoarders gain most out of the profits.

While the traders are able to forecast the short supply, the governments are not able to visualise and be in readiness to face the price increase without harm to farmers and the people.

Also, not able to work out methods to increase the returns to producers while protecting the consumers' interest. Given the will, the unusual price rise is not unpredictable.

Not only onions but the production, distribution, exports and imports of fruit and vegetables can be effectively managed for the benefit of the people learning lessons from the onion price crisis.

The concern of farmers, consumption needs of the people, more particularly of those who need but cannot afford to buy, should motivate the governments to change the scenario, not through temporary measures with the fear of a political fallout in the face of increasing prices.

The crisis might persist that vision dawns on the governments.

The writer is a development economist and commentator on economic and social affairs. The Statesman is a member of The Straits Times media partner Asia News Network, an alliance of 24 news media entities.

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