According to a report by The Economic Times, the Center is purchasing onions from Maharashtra, India's main onion-growing region, for a price that is 74% more than it was the previous year. Later this year, the state is scheduled to hold assembly elections. "Whereas the average rate at which onions were procured was Rs 16.93per kg last year, procurement is happening at around Rs 29.5 per kg via direct benefit transfer (DBT)," the news source quoted an official as saying.
The source stated that the Center intends to purchase onions from Maharashtra alone this fiscal year for a total of Rs1,500 crore. About Rs 1,200 crore was set aside by the government for the purchase of onions last year.
Export Restrictions and Market Intervention
The price of onions skyrocketed in August of last year, driving up food costs and general inflation throughout the majority of 2023 and the first part of 2024. The government was alarmed by this surge and outlawed the export of onions in an effort to rein in the escalating domestic costs.
Despite helping to stabilize retail onion prices, the move drew criticism for denying farmers access to the strong global demand. The government wants to buy 500,000 metric tons of onions in FY25 in order to keep buffer supplies at levels that were comparable to those of the previous year. According to the research, these stocks function as a tool for market intervention in the event of price increases.
The government organizations in charge of procurement, National Cooperative Consumers’ Federation of India (NCCF) and National Agricultural Cooperative Marketing Federation of India Ltd (NAFED), have been given a new objective: they are now expected to buy 250,000 metric tonnes of onions apiece, up from 200,000 metric tonnes in the previous year.
The insider, who was cited in the paper, stated that both organizations had previously purchased more than 200,000 metric tons of onions. The NCCF and Nafed have taken aggressive measures to promote onion growing in states other than Maharashtra and Karnataka as a result of a 38 percent year-over-year spike in retail inflation for onions in May. According to the newspaper, the official stated, "We expect 10,000 farmers to benefit from rabi procurement of onions in 2024 against 6,100 last year."
Expansion of the Area used to Sow Onions
As of last week, thirty percent of the onion planting in Karnataka had been finished, according to the Department of Consumer Affairs, which recorded a twenty-seven percent rise in the sowing area over the previous year. As per their latest announcement, prices are anticipated to stabilize as a result of this growth.
Harvesting onions usually takes place in the Rabi season, which runs from March to May, and in the Kharif and late Kharif seasons, which run from October to March. But between June and September, there is no harvesting, therefore buffer stockpiles of Rabi onions must be released to keep up with demand. In August of last year, the Ministry of Finance implemented a 40% export tariff in an effort to reduce exports due to rising prices.
Under-invoicing prevented this regulation from having a significant impact, thus on October 28, 2023, a minimum export price of $800 per tonne of onions was imposed. Onion arrivals during the peak season in November were reduced due to last year's harsh rains and hailstorms that affected onion crops in areas like Nashik and Ahmednagar in Maharashtra. Due to the price increases brought on by this scarcity, the government banned onion exports starting on December 8.
