Latest revision as of 08:38, 25 June 2021

[edit] The economics of onion farming

[edit] 2018: Low Wholesale Prices, High Debt

(With inputs from Bhavika Jain in Mumbai, Amarjeet Singh in Bhopal, Neel Kamal in Bathinda, Sandeep Rai in Meerut, and Priyangi Agarwal in Bareilly), Would you grow onions if all they got you was 2/kg?, December 14, 2018: The Times of India

Low Wholesale Prices, High Debt Are Squeezing Farmers Across India

On November 23 this year, the street near the farmers’ market at Nivdunge village in Ahmednagar district of Maharashtra ran red. It wasn’t blood. But Bandu Markad said it wasn’t any different for him. The farmer was in distress and he had just squished the pomegranates that he had grown under tremendous hardships, which included getting water in the drought-prone district.

Markad had reason to curse his luck. When he took the yield from his 1,200 trees to the market, he got a price of Rs 10 per kilo. Days ago, it was Rs 80. A video of Markad in tears and beating pomegranates to pulp soon went viral. Moved, people sent him money. At the end of five days, he had about Rs 2 lakh in his account.

One could call Markad fortunate. But across the country, a range of issues from debt to low prices for their produce have forced farmers to take desperate measures. Many killed themselves, destroying the lives they left behind. A month after BJP’s Devendra Fadnavis took over as CM of Maharashtra in 2014, he said tackling the agrarian crisis would be his top priority. He drafted a special action plan to check suicides in 14 of the worst-hit districts. In 2017, 2,917 suicides were reported, while in the current year, up to October 31, 2,223 farmers have ended their lives.

On March 12 this year, thousands of farmers from Maharashtra reached Mumbai after covering 180 km on foot to highlight their plight. On November 30, those in north and central India trooped into Delhi — among them prominent leaders from Opposition parties, indicating the significance the issue has acquired on the national political stage — to articulate their anguish. In the sullen crowd were men like Mohanlal Nagda of Rewli-Devli village in Neemuch district of MP.

Nagda had for long avoided looking at the big pile of onions rotting away in a corner of his farm. It invariably brought tears to his eyes. Harvested on his 2-acre land, all 100 quintals of his onion yield now lies dumped. He knows he won’t recover the cost if he tries to sell it.

“The mandi is only 10km away. But I’d rather not take my produce there,” he said. He quickly did the math. “The onions are harvested, but to cut them I must spend Rs 15,000 at Rs 150 per quintal. Transporting it to the mandi will cost Rs 2,500 more at Rs 500 per trolley. I need to spend another Rs 1,500 on loading, unloading and mandi expenses,” Nagda told TOI. “At Rs 2 per kg, all I’d get is Rs 20,000. So, I preferred dumping them, however much it hurts. I spent around Rs 40,000 on cultivation alone. The produce is already decaying. It terrifies me.”

Maharashtra has declared drought in 151 talukas across 26 districts in the wake of a deficient monsoon. The dry spell has affected an estimated 60% of the 1.6 crore farmers in the state. Due to below average rainfall during sowing season, the output has been hit too. Several areas reported over 70% crop loss and the state sought relief of Rs 7,962 crore from the Centre.

But respite looks remote for large chunks. A Nashik farmer recently sent a money order of Rs 1,064 to the PM’s office. It was what he’d got after selling 750 kg of onion after a crash in prices. It doesn’t help that Maharashtra — like many other states — hasn’t been able to break cartelisation by wholesale traders and middlemen in market yards to ensure fair pricing. Even implementation of minimum support price (MSP) has not been achieved by the state. Moreover, farmers across India are forced to sell their produce at low rates because the infrastructure to store and process it is lacking.

Acting on a report that finances, lack of assistance for healthcare and poor crop output were among the reasons for farm distress, Fadnavis proposed last year that agricultural loans should be waived and farmers can avail fresh aid from financial institutions. In June 2017, the CM announced a loan waiver scheme for 89 lakh farmers; loans amounting to Rs 32,000 crore were to be waived. So far, loans worth Rs 17,000 crore owed by 40 lakh farmers have been waived, while Rs 25,000 crore has been sanctioned for 50 lakh farmers as fresh aid. A raft of schemes has also been drafted to tackle agrarian distress, but implementation is slow owing to lack of coordination and supervision at different levels.

Far away in Punjab, farmers are on the warpath over implementation of the Swaminathan Commission recommendations on fixing of MSP of rabi and kharif crops. They also want a complete farm loan waiver, not the partial one okayed by the Amarinder Singh government.

Seven farm organisations in Punjab have decided to raise both issues and hold protests on December 18. The organisations have decided on round-the-clock protests outside banks from January 1 to January 5. These groups had earlier stopped the supply of milk and vegetables to urban areas in the state, leading to clashes with milkmen and a lot of produce literally going down the drain.

It’s a similar story but a different crop in UP. Owing to a bumper harvest this year, potato farmers say they are ruined as the price per 50kg sack has fallen to as low as Rs 20. Cold storages are full of unsold potato. Rakesh Kumar, owner of Mangla Mata cold storage in Badaun, said, “Storages in the region have a total capacity of 30 lakh sacks. Of these, 20% are potatoes, but no farmer is coming to fetch them right now because of falling prices. I have already thrown 7,000 sacks while 10,000 more are still here. Selling the produce at villages for Rs 20 per 50 kg sack does not even recover the cost of transportation.”

Mahendra Swaroop, state president, Cold Storage Association, UP, said, “Huge quantities of potato are stuck. District magistrates do not let us dump our produce anywhere as it stinks badly. Haalat kharab ho gayi sab ki.”

[edit] The economics of selling and buying onions

[edit] 2016-2019: In India’s eight largest metros

Atul Thakur , Oct 4, 2019: The Times of India

Retail mark-up from January 2016 to August 2019 (%)
From: Atul Thakur , Oct 4, 2019: The Times of India

Among India’s eight largest metros, consumers in Delhi are the most short-changed by retailers of onions with margins between the wholesale and retail prices being much higher than other cities. The data also shows that a sudden increase in prices does temporarily impact a retailer’s margins, but they soon adjust, though a fall in wholesale prices is transferred to the consumers after a considerable lag.

TOI analysed daily wholesale and retail prices data collated by the Union consumer affairs department for September 2019. Between September 1 and September 5, the wholesale price of onions fell from Rs 20.75 to Rs 18 per kg in Delhi. During this time, the lowest price range for the month, Delhi retail prices ranged from 102% to 117% over the wholesale price.

Why onions are such a tearjerker for Delhi

The mark-up was between 17% and 80% in Hyderabad, 20-70% in Chennai and 45-48% in Mumbai. For Ahmedabad, Kolkata, Pune and Bengaluru, it was under 30%.

So what happens during a price surge? Between September 15 and 16, wholesale prices in Delhi increased by Rs 8.5 per kg. The average retail price for the first 15 days in September was Rs 40 per kg while the average retail mark-up over the wholesale price for this period was Rs 20 per kg. Because of the sudden increase in wholesale price, the retail mark-up fell to Rs 14 per kg for September 16 and 17. In two days, the increase in wholesale prices was transferred to consumers and the retail price went up to Rs 52 on September 18 from Rs 43 on September 15. For the next 13 days, the retail price averaged Rs 58 per kg, the mark-up averaging Rs 23 a kg, higher than in the period when prices were not this high.

In Mumbai, the price surge happened between September 19 and September 21, when the wholesale price increased from Rs 33.5 to Rs 44.5 per kg. For the 13 days till September 21, for which both retail and wholesale price data is available for Mumbai, the retail price averaged Rs 41 per kg while the average retail markup was Rs 11.6 per kg. For the six days since then for which data is available, the average retail price was Rs 58 per kg and the mark-up was up to an average of Rs 18.5 per kg.

Similarly, in Pune, the surge happened between September 19 and September 23, when wholesale prices reached Rs 36.33 from Rs 25 a kg. In the 19 days prior to and during the surge, the average retail price of onion was Rs 24.8 a kg and the mark-up averaged Rs 1.6 per kg. For the seven days after the surge for which data is available, the average price was up to Rs 38 a kg and the mark-up rose to an average of Rs 7.7 per kg.

The other metros also exhibit a similar pattern. In Bengaluru, the wholesale price reached Rs 44 a kg on September 23 and fell to Rs 40 on September 25. The retail price was reported at Rs 48 on September 21 and hasn’t fallen since. Similarly, in Chennai, the wholesale price went up to Rs 35 on September 24 and has fallen to Rs 24 since September 26. The retail price on the other hand stabilised at Rs 37, which is higher than the pre-surge days. Hyderabad and Kolkata also had similar trends.

Ahmedabad is the only metro where retail mark-ups have stayed at Rs 2 per kg throughout the month even as wholesale prices have risen. Whether this is linked to the city’s relatively lower consumption of onion is a moot question.

[edit] Onions and Indian politics

History shows onions can make parties cry

Rising Cost Of Vegetable Hits Aam Admi Hard

Akshaya Mukul | TNN

The Times of India 2013/0814

[edit] 1981

There was a time when growing onion price contributed to the fall of otherwise credible Janata government in 1981 forcing Indira Gandhi, who made a big comeback after her defeat in 1977, to call it the Onion election.

Soon, she realized onions had made her cry as well. By November 1981, prices had sky-rocketed — Rs 6/kg — that Lok Dal’s Rameshewar Singh walked into the Rajya Sabha wearing a garland of onions and posters attached to it during the winter session. Chairperson M Hidayatullah asked him what was Singh wearing around the neck. After Singh complained of rising onion prices, Hidayatullah, known for ready wit, told him. “Let’s see what you will wear when the prices of tyres go up or for that matter the prices of shoes.”

Some members of Congres (S) protested with onions in their hand which they put on Hidayatullah’s desk. As the chairperson ordered removal of onions from his desk, Piloo Mody shot back, “It is very unfortunate that chairman should take away all the onions with him.” L K Advani then at his fiery best reminded the Congres how it had made onion an election issue and conveniently swept it under the carpet.

Next day, Mody offered Rao Birendra Singh Rs 100 in the Upper House, asking him to get 50 kg of onions if the price had really come down to Rs 2 per kg. Rameshwar Singh went a step ahead and put Rs 1,300 on Hidyatullah’s desk asking him to organize cheap onions. Amid the din, Congres’s Hari Singh Nalwa actually took the money and promised to supply onions. Such wit and repartee that made the larger point and forced the government to take action are now only part of archives as MPs rarely talk of onions or price rise and even when they do a deserted House greets them.

[edit] 1988

But voters have a way of settling scores — something the political class knows too well. Be it the late Pramod Mahajan on whom agitated Nashik farmers had hurled onions in 2000 or the BJP that met its nemesis during the 1998 election in Delhi and Rajasthan, onions do shape opinions or as a Planning Commission member says, “Onion is the only way inflation is understood by ordinary people. To afford or not afford onion is how poverty is understood across the country. A callous government has turned deaf and opposition thinks it has enough to bring it back to power. Humble onion could have deep fry both.”

[edit] Consumption

[edit] 2019

Onion Consumption in India, state-wise, presumably as in 2019.
From: Dipak Dash, November 6, 2020: The Times of India

See graphic:

Onion Consumption in India, state-wise, presumably as in 2019.

[edit] Apr- Nov: major cities

ATUL.MATHUR, Nov 28, 2019: The Times of India

Apr- Nov 2019/ prices in major Indian cities
From: ATUL.MATHUR, Nov 28, 2019: The Times of India

See graphic:

Apr- Nov 2019/ prices in major Indian cities

According to dealers in the capital, heavy rain in Gujarat, Maharashtra and Karnataka — the states that cater to the bulk of Delhi’s demand —had destroyed a major chunk of the crop resulting in the surge in prices.

“The quantity of onion that we are getting from Alwar in Rajasthan is not enough leading to a hike in prices. Unless we start getting fresh crop of onions from Gujarat and Maharashtra, which is not going to happen before the end of December, prices will not ease,” said Srikant Mishra, secretary, Onion Traders’ Association, Azadpur, adding that the stocks from Alwar will not last for more than 20 days.

While the wholesale price at Azadpur mandi is hovering between Rs 35 and Rs 60 per kg, in the retail market it goes up to Rs 100 in Delhi. Though Delhi government had started selling onions at a controlled rate of Rs 23.90 per kg through mobile vans in September and October, consumers are heavily dependent on retailers. Chief minister Arvind Kejriwal claims that the Centre had stopped supplying onions to Delhi at the controlled prices for the past 2-3 days. “We will write to the Centre,” he said.

Though India had imported onions from Afghanistan to bridge the gap, traders say the demand for this variety, which is big in size, is not very high in Delhi and people generally prefer the desi variety, which, they say, is tastier.

According to an estimate, Delhi consumes about 2,000 tonnes of onion daily. Since several traders from neighbouring cities in UP and Haryana prefer to buy the bulb from Delhi, the daily average demand at the wholesale markets touches 2,200-2,400 tonnes.

“But what we are currently getting is just about 1200 tonnes. A big chunk is also sent to UP, Bihar and Assam directly from Alwar and that’s why the gap between demand and supply is not bridging,” said Delhi agricultural marketing board member Ram Baran.

[edit] Exports

[edit] How the 2019 ban affected Asian consumers

Reuters, Oct 3, 2019: India Today

That's because India, the world's biggest seller of the Asian diet staple, has banned exports after extended monsoon downpours delayed harvests and supplies shrivelled. And dedicated buyers across the region, like Nepalese housewife Seema Pokharel, are flummoxed.

"This is a terrible increase," said Pokharel, out shopping for vegetables in Kathmandu. "Onion prices have more than doubled in the last month alone," Pokharel said.

Whether it's Pakistani chicken curry, Bangladeshi biryani or Indian sambar, Asian consumers have developed a serious dependence on Indian onion supplies for go-to dishes. Shorter shipment times than from rival exporters like China or Egypt play a crucial role in preserving the taste of the perishable commodity.

But last Sunday, New Delhi banned all exports from India after local prices jumped to 4,500 rupees ($63.30) per 100 kg, their highest in nearly six years, due to the delay in summer-sown crop arrivals triggered by longer, heavier rains than usual. Since the ban, countries such as Bangladesh have turned to the likes of Myanmar, Egypt, Turkey and China to increase supplies in a bid bring prices down, government officials and traders said.

But the hefty volumes lost will be hard to replace.

India exported 2.2 million tonnes of fresh onions in the 2018/19 fiscal year ended March 31, according to data from India's Agricultural and Processed Food Products Export Development Authority. That's more than half of all imports by Asian countries, traders estimate.

'Taking advantage’

Rising prices of alternative supplies will add to the headache for importers trying to get the vegetable from elsewhere, said Mohammad Idris, a trader based in Dhaka.

In the Bangladesh capital, consumers are now being asked to pay 120 taka ($1.42) per kilogramme for their prized onions - twice the price a fortnight ago and the highest since December 2013.

"Prices are going up elsewhere in Asia and Europe," said Idris. "Other exporting countries are taking advantage of the Indian ban" to raise their asking price.

In response to the crisis, the government of Bangladesh has initiated sales of subsidised onions through the state-run Trading Corporation of Bangladesh (TCB).

"We are looking for all possible options to import onions. Our target is to import in the shortest possible time," said TCB spokesman Humayun Kabir.

But the shipments from elsewhere - Iran and Turkey are also potential suppliers - that authorities in countries across the region are investigating will all take time.

"It takes one month when it comes from Egypt and about 25 days from China, while it takes only a few days from India," said Dhaka trader Idris.

The need for alternative imports is so severe, though, that countries like Sri Lanka have already placed orders with Egypt and China, said G Rajendran, president of the Essential Food Commodities, Importers and Traders Association.

Onion prices in Sri Lanka have risen by 50 per cent in a week, to 280-300 Sri Lankan rupees ($1.7) per kilogramme.

'Double the price’

For other countries, there may be little option but to sit tight and hope for the best.

Malaysia, the second-biggest buyer of Indian onions, expects the ban to be temporary and sees no reason to panic, said Sim Tze Tzin, deputy minister of agriculture.

But even India has been importing onions from Egypt in an effort to calm prices. And there won't be any meaningful drop in prices before summer-sown crops start to hit the market, said Ajit Shah, president of the Mumbai-based Onion Exporters' Association.

That's not expected until mid-November, meaning the export ban isn't going away in the near term.

For now, consumers like Kathmandu shopper Pokharel are having to change habits across Asia.

"I went to buy 5 kilogrammes of onions for our five-member family but ended up buying only 3 kilogrammes due to higher prices," said Afroza Mimi, a Dhaka housewife on a shopping expedition the day after India imposed the export ban.

"They [traders] are selling old stock nearly at double the price. This is crazy," Afroza Mimi said.