Even while onion prices have soared to Rs 200 per kg (€2.60) at some places, Indian farmers are still not making money from the great onion price hike. The majority of the end consumer price is taken by middlemen, not farmers. This means the agrarian community is still on the losing side.
“It is well-appreciated that farmers bear more of the loss when prices fall and receive less of the profit when prices rise. The exact margins could vary depending on the crop and the corresponding supply-chain dynamics,” Sreejith Balasubramanian, an economist at IDFC AMC, told Financial Express Online.
While the majority of the money is taken by middlemen, the lack of storage facilities adds to the woes of farmers as they are forced to sell their produce to middlemen to avoid rotting of the crop.
Symmetric government intervention necessary
The government intervention is seen when prices hike and not when they fall. Calling this ‘asymmetric government intervention’, Balasubramanian said that this potentially makes farmers’ problem worse. “The permanent fix does not lie in ad-hoc measures like export bans, higher imports and stock limits. In fact, long-term solutions are the ones often talked about and include better & widespread storage solutions, storage of onion-extracts vs. raw onions, etc. to stabilise prices around the year,” he said.
Onion prices have been trading high for some time now and according to media reports, rates have breached Rs 200 per kg mark in some areas. Several factors have contributed to the same including hoarding by middlemen, late monsoon rains resulted in lesser sowing of crops and then rotting of crops due to flood in Maharashtra and Karnataka. The government, in the meanwhile, has deployed several measures to keep the prices in check. This includes importing onions from Egypt and Turkey, banning exports from the country and stock limits are also in place to avoid hoarding.
Meanwhile, the onion prices are expected to remain high until February 2020 as fresh produce from Gujarat will only be available after mid-January and the same will stabilise the prices by February, Sreejith Balasubramanian said earlier.