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Teary Eyed Farmers: Analysis of the Onion Crisis with Solutions
01-Jul-2019
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By Rakshit Sonawane, (Sr. journalist)
[email protected]
The Maharashtra state cabinet announced financial assistance of Rs 200 per quintal of onions to farmers who are acutely distressed, after prices of the commodity plummeted to below Rs 100 per quintal, even at India’s largest onion marketplace located at Lasalgaon in Nashik district.
While the Devendra Fadnavis government is busy patting its own back on the relief this will mean to farmers, the fact remains that extreme fluctuations in onion prices are a constant recurrence that brings tears to the eyes of either farmers for consumers, depending on whether they fall or rise. The recurrence of the onion crisis is mostly borne out of ignorance, a lack of political will and abjectly wrong choices made by national governments in power, be it the Congress-led UPA or the BJP-led NDA.
Maharashtra is the market leader of onion production in the country, followed by Madhya Pradesh and Karnataka. The commodity is grown thrice in a year: with the ‘Kharif’ crop called ‘Pol’ (cultivated during the monsoons), the ‘Late Kharif’ crop known as ‘Rangda’ (cultivated after monsoons) and the ‘Rabi’ crop (harvested during summer). The shelf-life of onions grown during the ‘Kharif’ season is different compared to the commodity grown during the ‘Late Kharif’ and ‘Rabi’ seasons, which is one of the major causes for the sharp price fluctuations.
The Kharif onion crop, harvested around the Diwali festival, is thick-skinned and has a high moisture content but has a shelf-life of less than six weeks. The ‘Late Kharif’ crop harvested around November-December also has a low shelf-life due to its similarities with the ‘Kharif’ commodity. Both the Kharif and Late Kharif onion produce need be sold very soon after the harvest as they begin rotting quickly.
The highest production of onions occurs during the ‘Rabi’ season, when the crop called ‘Gavthi’ or ‘Oonhali’ is harvested during the April-May period. This variety has a shelf-life of over six to seven months. Every year, ‘Rabi’ stocks of onions ensure a steady supply from April-May right up to October-November, by when the ‘Kharif’ onions are expected to enter the market.
The problem starts when there is excess or lower production of the ‘Kharif’ or ‘Late Kharif’ onions. Since ‘Kharif’ onions are rain-fed with a substantial number of small farmers cultivating it, any truancy by the monsoon leads to a sharp drop in production that immediately affects these marginal farmers. Besides this, a scarcity results in the skyrocketing of prices of ‘Rabi’ onions (that were harvested six months earlier), but bought and stored by traders. Similar is the case of ‘Late Kharif’ onions that has a low shelf-life, and needs to be sold before rotting sets in. When there is a bumper production of ‘Late Kharif’ onions what follows is a dead drop in prices and desperate farmers trying to sell their produce as quickly as possible.
There are three other factors that impact the onion crop’s economy: The Essential Commodities Act (ECA); Minimum Export Price (MEP) and Minimum Support Price (MSP). The ECA protects essential commodities through imposed restrictions on the maximum storage that is permissible thus preventing black-marketing. However, no consistent policy in our country has effectively provided this safety cover for under the ECA. The Bharatiya Janata Party led National Democratic Alliance (NDA) government attempted to do so and had even brought onions under ECA regulations in 1999, but the subsequent United Progressive Alliance (UPA) government removed it from the list of commodities under ECA in 2004. The main reason attributed to this removal of ECA cover for onions in 2004, was the perceived notion that in 1999 the Atal Behari Vajpayee led NDA lost elections in four states back in 1998 due to the skyrocketing prices of onion in cities and urban centres.
The MEP is determined by the ministry of commerce, that follows a government set pricing strategy for commodities, including onions, intended for international markets. No farmer or trader is allowed to sell onions below the prescribed MEP. There were occasions when despite a bumper production, exports in the desired quantity became impossible due to a non-competitive MEP that could not match up to rival countries that sold their onion produce at cheaper rates in the same international markets. On this issue too, political consistency has failed the onion farmers. The UPA finally suspended MEP to boost exports, but the NDA revived it again in 2014.
There are fresh demands for a higher MSP for onions, but neither the UPA nor the NDA governments have shown the political willingness to announce the same. The main reason cited for this is extreme fluctuations in prices due to distinct and differing shelf-lives of the onions grown during the three different seasons. The NDA government had, after its poll debacle in four states in 1998, asked the Bhabha Atomic Research Centre (BARC) to set up an irradiation center at Lasalgaon to increase the shelf-life of onions. A Cobalt-60 Gamma radiation center was erected at a cost of Rs 8 crore. However, this failed to increase the shelf-life of the ‘Kharif’ or ‘Later Kharif’ onion crop, which are highly perishable. The facility was later put to use for irradiating spices meant for exports. If the short shelf-lives of the two varieties (‘Kharif’ and Late Kharif) of onions had been enhanced, the problem would have been resolved to a large extent, during the important lean supply season (between October and March) during the year long onion cultivation cycle.
From time to time, the Government has intervened, intermittently, in the market to either provide relief to consumers by increasing imports of onions or, by rendering financial aid to farmers whenever prices plummeted. However, the government has consciously avoided the announcement of a MSP that would effectively solve the problem for the permanent good of onion farmers.
In 2000, a bumper harvest led to a glut and prices suddenly fell reaching the range of Rs 150 per quintal. The Congress-NCP state government in Maharashtra decided to procure this farm produce at a rate of Rs 300 per quintal for the normal variety of onions and at a rate of Rs 350 per quintal for good quality onions from the farmers. Attempts were then made to sell these onions stocks through the public distribution system (PDS), but the time-lag involved resulted in the commodity had attracted additional costs in overheads by the time it reached the PDS ration shops which increased its retail price to Rs 5 per kilogram.
There were just no takers for the government supplied onions as the farm produce was available in the open market at the rate of Rs 3 per kg. The government had little option but to dump the quickly rotting onions. Around two lakh quintals of onions were dumped as a result of which the state exchequer suffered a loss of Rs 182 crore. The state approached the Central Government, seeking a joint burden being shared between the Centre and Maharashtra, but the NDA refused to bear the cross for the state government on the issue, raising the heckles of the Congress-Nationalist Congress Party (NCP) who blamed political prejudice for the same.
This was true as there was already a precedent for such joint sharing of financial burden between the Central and State governments. During V P singh’s regime in 1989, a bumper harvest had led to a similar glut of onions in Maharashtra and prices fell to even to Rs 40 per quintal (40 paise per kilo) in wholesale markets. The Central Government as well as Maharashtra bought the onions at higher than market rates, at Rs 100 per quintal and shared the financial burden equally.
The ideal solution to the issue has to include factors like a rationalized crop planning (by determining the area under cultivation), cold chain storage facilities for farmers to stock Rabi onions (making them less dependent on traders having huge warehouse facilities), proper and more professional pre-and-post harvesting practices and a more pragmatic and serious thought on the real time implications of the three government regulated tariffs for ECA, MEP and MSP.”
“By Rakshit Sonawane, (Sr. journalist)
[email protected]
The Maharashtra state cabinet announced financial assistance of Rs 200 per quintal of onions to farmers who are acutely distressed, after prices of the commodity plummeted to below Rs 100 per quintal, even at India’s largest onion marketplace located at Lasalgaon in Nashik district.
While the Devendra Fadnavis government is busy patting its own back on the relief this will mean to farmers, the fact remains that extreme fluctuations in onion prices are a constant recurrence that brings tears to the eyes of either farmers for consumers, depending on whether they fall or rise. The recurrence of the onion crisis is mostly borne out of ignorance, a lack of political will and abjectly wrong choices made by national governments in power, be it the Congress-led UPA or the BJP-led NDA.
Maharashtra is the market leader of onion production in the country, followed by Madhya Pradesh and Karnataka. The commodity is grown thrice in a year: with the ‘Kharif’ crop called ‘Pol’ (cultivated during the monsoons), the ‘Late Kharif’ crop known as ‘Rangda’ (cultivated after monsoons) and the ‘Rabi’ crop (harvested during summer). The shelf-life of onions grown during the ‘Kharif’ season is different compared to the commodity grown during the ‘Late Kharif’ and ‘Rabi’ seasons, which is one of the major causes for the sharp price fluctuations.
The Kharif onion crop, harvested around the Diwali festival, is thick-skinned and has a high moisture content but has a shelf-life of less than six weeks. The ‘Late Kharif’ crop harvested around November-December also has a low shelf-life due to its similarities with the ‘Kharif’ commodity. Both the Kharif and Late Kharif onion produce need be sold very soon after the harvest as they begin rotting quickly.
The highest production of onions occurs during the ‘Rabi’ season, when the crop called ‘Gavthi’ or ‘Oonhali’ is harvested during the April-May period. This variety has a shelf-life of over six to seven months. Every year, ‘Rabi’ stocks of onions ensure a steady supply from April-May right up to October-November, by when the ‘Kharif’ onions are expected to enter the market.
The problem starts when there is excess or lower production of the ‘Kharif’ or ‘Late Kharif’ onions. Since ‘Kharif’ onions are rain-fed with a substantial number of small farmers cultivating it, any truancy by the monsoon leads to a sharp drop in production that immediately affects these marginal farmers. Besides this, a scarcity results in the skyrocketing of prices of ‘Rabi’ onions (that were harvested six months earlier), but bought and stored by traders. Similar is the case of ‘Late Kharif’ onions that has a low shelf-life, and needs to be sold before rotting sets in. When there is a bumper production of ‘Late Kharif’ onions what follows is a dead drop in prices and desperate farmers trying to sell their produce as quickly as possible.
There are three other factors that impact the onion crop’s economy: The Essential Commodities Act (ECA); Minimum Export Price (MEP) and Minimum Support Price (MSP). The ECA protects essential commodities through imposed restrictions on the maximum storage that is permissible thus preventing black-marketing. However, no consistent policy in our country has effectively provided this safety cover for under the ECA. The Bharatiya Janata Party led National Democratic Alliance (NDA) government attempted to do so and had even brought onions under ECA regulations in 1999, but the subsequent United Progressive Alliance (UPA) government removed it from the list of commodities under ECA in 2004. The main reason attributed to this removal of ECA cover for onions in 2004, was the perceived notion that in 1999 the Atal Behari Vajpayee led NDA lost elections in four states back in 1998 due to the skyrocketing prices of onion in cities and urban centres.
The MEP is determined by the ministry of commerce, that follows a government set pricing strategy for commodities, including onions, intended for international markets. No farmer or trader is allowed to sell onions below the prescribed MEP. There were occasions when despite a bumper production, exports in the desired quantity became impossible due to a non-competitive MEP that could not match up to rival countries that sold their onion produce at cheaper rates in the same international markets. On this issue too, political consistency has failed the onion farmers. The UPA finally suspended MEP to boost exports, but the NDA revived it again in 2014.
There are fresh demands for a higher MSP for onions, but neither the UPA nor the NDA governments have shown the political willingness to announce the same. The main reason cited for this is extreme fluctuations in prices due to distinct and differing shelf-lives of the onions grown during the three different seasons. The NDA government had, after its poll debacle in four states in 1998, asked the Bhabha Atomic Research Centre (BARC) to set up an irradiation center at Lasalgaon to increase the shelf-life of onions. A Cobalt-60 Gamma radiation center was erected at a cost of Rs 8 crore. However, this failed to increase the shelf-life of the ‘Kharif’ or ‘Later Kharif’ onion crop, which are highly perishable. The facility was later put to use for irradiating spices meant for exports. If the short shelf-lives of the two varieties (‘Kharif’ and Late Kharif) of onions had been enhanced, the problem would have been resolved to a large extent, during the important lean supply season (between October and March) during the year long onion cultivation cycle.
From time to time, the Government has intervened, intermittently, in the market to either provide relief to consumers by increasing imports of onions or, by rendering financial aid to farmers whenever prices plummeted. However, the government has consciously avoided the announcement of a MSP that would effectively solve the problem for the permanent good of onion farmers.
In 2000, a bumper harvest led to a glut and prices suddenly fell reaching the range of Rs 150 per quintal. The Congress-NCP state government in Maharashtra decided to procure this farm produce at a rate of Rs 300 per quintal for the normal variety of onions and at a rate of Rs 350 per quintal for good quality onions from the farmers. Attempts were then made to sell these onions stocks through the public distribution system (PDS), but the time-lag involved resulted in the commodity had attracted additional costs in overheads by the time it reached the PDS ration shops which increased its retail price to Rs 5 per kilogram.
There were just no takers for the government supplied onions as the farm produce was available in the open market at the rate of Rs 3 per kg. The government had little option but to dump the quickly rotting onions. Around two lakh quintals of onions were dumped as a result of which the state exchequer suffered a loss of Rs 182 crore. The state approached the Central Government, seeking a joint burden being shared between the Centre and Maharashtra, but the NDA refused to bear the cross for the state government on the issue, raising the heckles of the Congress-Nationalist Congress Party (NCP) who blamed political prejudice for the same.
This was true as there was already a precedent for such joint sharing of financial burden between the Central and State governments. During V P singh’s regime in 1989, a bumper harvest had led to a similar glut of onions in Maharashtra and prices fell to even to Rs 40 per quintal (40 paise per kilo) in wholesale markets. The Central Government as well as Maharashtra bought the onions at higher than market rates, at Rs 100 per quintal and shared the financial burden equally.
The ideal solution to the issue has to include factors like a rationalized crop planning (by determining the area under cultivation), cold chain storage facilities for farmers to stock Rabi onions (making them less dependent on traders having huge warehouse facilities), proper and more professional pre-and-post harvesting practices and a more pragmatic and serious thought on the real time implications of the three government regulated tariffs for ECA, MEP and MSP.”
