Why Are Onion Prices High In India? Here's What You Need To Know

The prices of onions in some states have risen to as much as Rs 100 per kg , forcing the Centre to facilitate imports through private trade from Afghanistan, Egypt, Turkey and Iran. 

The price rise in retail comes at a time when wholesale prices have seen a dip, according to The Indian Express . This reversal of normal trend, the chairman of the wholesale market of Lasalgaon Jaydutt Holkar was quoted as saying in the report, could be because of trade impositions placed by the Centre earlier this year.

In September, the government had prohibited onion exports and imposed limits on the stocks in order to prevent hoarding. A stock limit of 100 quintals for retail traders and 500 quintals for wholesale traders was imposed, reported The Hindu .

Holkar told The Indian Express that such stringent limits on stocks had disrupted the markets. 

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How much has the price risen? 

In Delhi, the retail price of onion has risen by 45% in the past week to Rs 80/kg. PTI cited official data from 1 October which said that the rate stood at Rs 55/kg then.

Even in Madhya Pradesh, the prices are in the range of Rs 70-80 per kg.  Minister for Food and Civil Supplies Pradyumn Singh Tomar said the government will take steps to control the onion prices. 

The prices have risen to Rs 60 per kg in Dehradun, according to ANI , and a wholesaler said the problem will be resolved only when the new stock from Nasik comes in.

In Odisha, onions are selling at Rs 4,800-6,200 per quintal and Rs 52-70 per kilogram in different markets, an official told PTI. Odisha’s Food Supplies and Civil Supplies Minister RP Swain had on Tuesday said the price of onions may further go up by Rs 6-10 per kilogram, due to rain in three supplier states.

In Chandigarh, the onion price had shot up to Rs 80 per kg in vegetable markets on Tuesday. Street vendors had increased the price to Rs 100 per kg, according to The Times of India . 

Even in Chennai, the prices are between Rs 60-80 per kg. 

Why are the prices rising?

Traders, according to NDTV , are blaming the price hike on short supply from Nasik. “Only because of rain there is less supply. Onion sale hasn’t been hit,” Selvam, a vegetable seller, was quoted as saying in the report.

This has been triggered by heavy rain in Nasik, Ahmednagar and Pune because of damage to crops, the Daily Pioneer said. Over 54 lakh hectares of crops are said to have been badly damaged in the rains, the report added. 

Union Food and Consumer Affairs Minister Ram Vilas Paswan said on Wednesday prices have gone up as production (kharif onion) has declined by 30-40% in the country. 

There was a delay in sowing of kharif onion because of late arrival of monsoon and later floods in many states damaged the crop, he said, according to PTI.

The minister also said that prices fluctuate depending on supply-demand and currently, there is mismatch in this. 

Consumer Affairs Secretary Avinash K Srivastava said onion production is estimated to have declined to 20 lakh tonnes in 2019 kharif season from 30 lakh tonnes in the same season last year.

What is the government doing?

Paswan reviewed the situation of demand, supply and prices with top officials of food and consumer affairs departments. The secretaries of both the departments were present.

When the minister was asked when the prices will come down, he said, “I am not an astrologer but it should hopefully come down by end of November or beginning December.”

Paswan also highlighted the government’s measures, according to PTI. He said the government has banned the export of raw and processed onions, imposed stock holding limits on traders besides offloading buffer stock at a cheaper rate of Rs 23.90 per kg to provide relief to consumers.

The Modi government has also decided to facilitate imports from Iran, Turkey, Egypt and Afghanistan. Srivastava directed to relax phytosanitary and fumigation norms to speed up onion imports from these countries, The Economic Times said.

Why the onion price hike should be worrying?

A spike in onion prices has led to the ouster of previous governments in India. The price moving too far one way or another is likely to anger a large block of voters, or the country’s farmers, as BBC pointed out last month. 

In 1998, a sharp spike in onion prices led to the fall of the BJP government in Delhi. In the 1980 general election, high onion prices helped former Prime Minister Indira Gandhi dislodge the previous government. 

Indira Gandhi used soaring onion prices as a metaphor for the economic failures of the previous government, according to BBC.

In 2013, onions were blamed for soaring inflation, another Bloomberg report said.

Onions have a weight of 0.6% in the overall inflation basket and contribute about 10% to the vegetable basket, a Bloomberg report said. The report added that over 200% increase in onion prices pushed India’s headline inflation rate to its highest level since July 2018.

Consumer prices rose 3.99% in September from a year earlier and vegetable prices increased 15.4% on year, Bloomberg cites data by the Statistics Ministry.

(With PTI and Reuters inputs)