Home » Business & Economy » Onion prices make farmers weep. Here's how the govt can help

Onion prices make farmers weep. Here's how the govt can help

Neeraj Thakur | Updated on: 10 February 2017, 1:50 IST

It's a fact: whether an onion crop succeeds or fails, someone in India will be crying.

First, it was the consumers who wept when the crop was not great, and the retail price of onion shot through the roof to touch Rs 80 per kg.

And now, despite a bumper crop, it's the farmers who are crying. As per initial reports, the price has fallen to Rs 4-5 per kg in the wholesale market, while in some mandis, it is reported to have fallen to 30 paise per kg.

This means farmers are selling the produce well below the cost of production.

Also read: A farmer's wake-up call to India: try to understand why we die

Reasons for the price drop

India's onion output is estimated to touch a new record at 203 lakh tonnes in the 2015-16 crop year.

Onion output had dropped to 189.2 lakh tonnes in the 2014-15 crop year (July-June) due to poor rains. The previous record output was 194 lakh tonnes in 2013-14.

The total land under onion cultivation was 12 lakh hectares this year, slightly higher than the 11.73 hectares last year.

Under normal circumstances, a bumper crop should mean happy days for farmers as well as consumers. But this is not the case in India, since the government doesn't give any support to farmers for crops other than wheat and rice.

Therefore, the farmers have to compete with each other and sell their crop at throwaway prices. It's almost like punishment for harvesting a good crop.

The dichotomy

When the crop is not good, and the farmers have a chance to make some money by selling their limited produce at a higher price. But in such a scenario, the government intervenes by importing the commodity to subdue the price.

This is what happened in 2015, when the government imported 1,000 tonnes of onion to bring the prices under control - they were brought down by almost 50%.

Also read: PM Modi launches online agri-market. Nothing new, say experts

Who is making merry?

A bumper crop brings cheer to traders. The start quoting the lowest possible prices for onions the moment they get to know of a good crop.

Since traders have huge godowns to store the commodity, they can afford to purchase it at rock-bottom prices from the farmers, and release them at higher prices later on, when the supply drops.

What should the govt do?

The government can use the same strategy as the traders, albeit with better motives with respect to farmers. It can pick up the excess stock from the market and release it at a later stage.

According to Ajay Jakhar, chairman of the Bharatiya Krishak Samaj, a lobby group for farmers: "Farmers do not have the capacity to store their crop. The government should purchase 5-10% of their crop to stabilise the market, and stop the price from falling below the cost of production for farmers. After a few months, the government can sell this crop in the market, and distribute the benefit among the farmers."

Onion is a non-perishable commodity, and can be stored for many months without much expenditure on the part of the government.

For farmers, storing the corp is the problem, because of a lack of space. If the government helps them with its storage capacity, it would go a long way in abating the distress of the onion farmers.

Edited by Shreyas Sharma

Also read: You think this Budget was for farmers? Think again

First published: 19 April 2016, 7:13 IST
Neeraj Thakur @neerajthakur2

As a financial journalist, his interface with the two dominant 'isms'- Marxism and Capitalism- has made him realise that an ideal economic order of the world would lie somewhere between the two.

Senior Assistant Editor at Catch, Neeraj writes on everything related to business and the economy.

He has been associated with Businessworld, DNA and Business Standard in the past.

When not thinking about stories, he is busy playing with his pet dog, watching old Hindi movies or searching through the Vividh Bharti station on his Philips radio transistor.