Saturday, January 8, 2011

Onion pricing crisis: Who'll bell the cat?

“Onion is politically hyper sensitive. But the onion growers have
never got due attention in India,” remarked a small-time onion trader in north Delhi. Well, he has a point.
As the continued rise in prices of onion has left the UPA regime headed by Dr Manmohan Singh and the agriculture ministry in despondency, market
watchers largely feel at policy level as a food item it has remained “neglected always” despite being a politically sensitive
My undrstanding is there is no clear understanding at the level of agriculture ministry and policy makers on what is good monsoon or untimely rainfall as far as onion cultivation is concerned.
By the official definition, onion is not considered a “major crop” in India as the quantity of exports is abysmally small.
It goes without saying that though onion is a base vegetable in practically every Indian dish, official estimates of the use of the crop per person on daily basis is modest 20-25 gram. Hence all these years at at the government of India and the union agriculture ministry level nothing concrete has been worked out.

The approach of the government, especially the Commerce minister Mr Anand Sharma, a known Manmohan prtege, and a section of politicians that
the onion prices have gone up due to hoarding is in fact “faulty”.
“This is a new discovery. Onions hoarding is not possible due to
various factors. How did the government suddenly discover onion
hoarding?,” asks mt trader friend. However, the IT raids showed in some quarters, unscrupulous elements had tried to store onion to garner some quick buck.

Market watchers say the official response especially since December
2010 is also “surprising” and “drastic” and not based on proper
In India We do not have any future markets in onions, to send any advance
price signal about supply conditions. Probablt this needs greater attention than the run-of-the-mill Left and socialist inspired argument that future trades encourage high inflation.

The government response to the onion crisis was very generic and media centric. The abolition of import duty only fetched them media coverage and probably nothing else as Pakistan also showed its special relation with India and said it cannot allow onion export to ease the market in this country and help out the Dr Manmohan Singh government.
It is a “big mistake” for the government or anyone to ignore the real
possibility that onion prices have gone up due to production
shortfall following unseasonal rainfall.
So far, no mechanism is talked about on how to deal with a situation when there is production shortfall in onion and other items.
Perhaps only Sharad Pawar made the right observations but probably
at a wrong time summing up the complacency remains.
So instead of taking knee-jerk reactions, policy making and considerable attention have to be devoted by the Agriculture ministry to improve the farm output.
After a relative 10-day respite, the fear around onion crisis returned yet again by January 4 with reports spreading like wildfire that despite quantum leap in imports of the base vegetable item from Pakistan the prices are still on high in several Indian markets.
A beleaguered Agriculture ministry was put on the defensive as reports
emanated from cities like Mumbai, Bangalore, Chandigarh, Pune and
other northern and western Indian cities that the onion prices are
gradually shooting up.
The rise in prices of onion was reported within days the union
agriculture minister, Mr Sharad Pawar yet again in a quite
foot-in-the-mouth syndrome made a speculative remarks that the prices
of onion will “start declining from the second week of January”. “The
unseasonal rainfall affected the onion crop, leading to a hike in its
price. However, the prices will start declining from the second week
of January,” he said in Satara district of Maharashtra.
Coupled with minister’s remarks, the situation only aggravated as
about 8 containers of onions from Pakistan have been lying at the
Jawarhalal Nehru Port (JNPT) in Mumbai for the last five days, waiting
for the requisite clearances before they are dispatched to the
wholesale market. The agriculture ministry has reportedly acted on the
issue only following media reports.
These bottlenecks ought to be addressed properly.


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