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Maharashtra: Did traders collude to create an artificial scarcity of onions?


Rupashree Nanda,CNN-IBN
Sep 23, 2013 at 01:32pm IST

New Delhi: Agriculture Minister Sharad Pawar, who has always defended high prices for agricultural commodities arguing that it benefits farmers, on Thursday shrugged off responsibility for soaring onion prices. "I am not dealing in this, consumer affairs is dealing," Pawar said.

The minister, however, later in the day said that the situation would ease in the coming two to three weeks.

"There is a lot of talk about the rise in onion prices; however, when prices fall no one shows any concern for the farmers. When farmers are getting more money for their produce we should not complain," Pawar had said on September 17, 2013.

The sudden shrinking of arrivals of onions in the major markets of Maharashtra has raised the uncomfortable question of whether traders colluded to create an artificial scarcity.

A report from the Competition Commission of India post the 2010 onion crisis noted that inflation is also caused by market inefficiencies, weak supply chains and monopolies in the market. So the question is - what have the governments, both at the Center and the states, done to encourage new players?

Blaming drought for the increase in the price of onions, Pawar had said on August 2, "You see, that one day out of 365 days of the year, we always see there is the problem of vegetables or onions so immediately whole media, television everybody start making noise. But one should see why it is happening. Mainly, sometimes there is damage because of rains, or non availability of rains. This year for instance onion prices have gone up. And reason is that major producing centers of onion were facing severe drought. The onion grower have hired water tankers and brought water from 30 and 40 kilometers and saved their onions. So their cost has gone up. And in such situation, that reflects in prices."

But do high onion prices really benefit farmers? A Competition Commission of India report contradicts Pawar's claims. In its report, the commission says the role of farmers in price discovery is minimal due to low size of farm holdings. Most of the trading is in the hands of commission agents and traders, it added.

So is Pawar's defence of high prices lending support to speculators? On Thursday, Pawar dismissed the role of hoarding and put the onus on state governments to act. But the fact is, in Maharashtra, the Agricultural Produce Marketing Committee (APMC) which controls the onion trade, is largely controlled by the NCP. What strengthens the suspicion of hoarding is that while production has fallen less than 5 per cent, the supply to major markets in Maharashtra has dropped sharply between April and July.

In Lasalgaon market, arrivals dropped by 40 per cent. While in Pimpalgaon, it saw a drop of 27 per cent, and 47 per cent fall in Manmad. Meanwhile, Solapur saw a drop of 84 per cent.

An alarmed Consumer Affairs Ministry noted the artificial scarcity. But there is another side to the story too.

- In 2011-12, onion production was 175 lakh tonnes and exports stood at 15 lakh tonnes.

- In 2012-13 production slumped to 166.55 lakh tonnes, while exports increased to 18 lakh tonnes.

The government imposed a minimum export price on onions to 650 dollars per MT only in August when onion prices were already high. It further raised the price to 900 dollars MT as late as August 18. The question is whether these decisions could have been taken earlier?

In a damage control mode, Food Minister KV Thomas met Pawar on Thursday and called up Maharashtra Chief Minister Prithviraj Chavan to ensure a steady supply into the markets. The government is banking on fresh harvest and imports to ease the prices.

The 2013 onion crisis is a repetition of what happened in 2010 - then the Competition Commission of India had recommended a revamp of the APMC in Maharashtra to discourage the oligopoly of the politically controlled entity. But until that happens, onion prices will remain vulnerable to manipulation.

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