Friday, September 20, 2013


Is onion an important food for Indians? Obviously it appears so as reflected by the political significance attached to shooting prices that rule the onion markets across the country. It is not easy to forget what happened in Delhi State two decades ago when spiraling onion prices resulted in collapse of the then government. Present situation is reminiscent of what prevailed then and it appears Onion and Petrol are competing with each other to see which will breach the Rs 100 mark first! What is incongruous is the effect of this price escalation of onion on the national economy and the muddied thinking of the present day government in tackling the same. Here is a take on this "tear some" issue as is being experienced by the Indian citizen every day!

"The uptick of wholesale prices to a six month high of 6.1% in August, largely fuelled by a 244.6% increase in onion prices, is bad news for the economy. Not only does it set back hopes of a rate cut to boost investments in the monetary policy review by the RBI at the end of the week, it also highlights the government's continuing inability to manage the food economy and rein in volatility of food prices. Blaming bad weather doesn't cut much ice. The rising prices of essential food items like rice despite good monsoons are mainly due to the large stocks accumulated to meet the needs of the food security Act. The continuous increase in minimum support prices for rice and wheat by the government has also proved counterproductive as it has discouraged a shift in cropping patterns to vegetables or the diversification of production to livestock, fish and poultry. Consequently, prices of vegetables and high protein foods like milk, eggs, fish and meat have shot up, making them unaffordable to the poor. Inadequate storage facilities and the failure to modernise the food supply chain have also added to the problem. Curbing volatility in food prices and improving supply would require strong measures by both state and Union governments. States have to reform the Agriculture Produce Marketing Committee Act to allow for contract farming, direct marketing and setting up markets in the private sector. Adequate credit has to be ensured for setting up cold storage chains. The bias against large organised retailers, including foreign chains, has to be dropped. Given their global supply chains, they would have cooled domestic prices by realigning their procurement orders. The government should also shift to direct cash transfers from food subsidies, thus reducing the need to build huge stocks".

If government sources are to be believed this phenomenon is unlikely to last for long and the prices would come down in a "few days" time! According to records onion prices have been ruling abnormally high during the last few months and it is far fetched to expect the prices to come down soon. Announcing imports is just a play of words meaning nothing as not even a kilogram of foreign onion has landed in the country yet! It is a pity that consequences of policies announced like the Food Security Act are not thought of and how the country will suffer because of these follies. It is believed that farmers may increasingly switch over to cereals in the coming years because of high procurement prices offered to them, further endangering the nutritional security of the population. One can only hope that a more cohesive and visionary government after the coming general election will address these issues and reverse the present disastrous policies ruining the country. 


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