Onion Price Surge in India: Supply Shortages, Government Interventions, and Future Outlook

Let’s Understand the Concerns over onion scarcity prompt the Indian government to implement export restrictions and bolster buffer stocks, as shortage is expected to continue until the new kharif harvest in December.

• Major Cause of Onion Price rise in India: The price rise is due to decrease in onion supply in the markets. The shortage of onion is a result of stock being destroyed due to recent rains.
• Measures Imposed: The government has been forced to impose Minimum Export Price for onions and procure additional 2 lakh tonnes of onion for buffer stocks.
  • The government has notified the minimum export price (MEP) of USD 800 per Metric Ton (MT) for the export of onions, which will be effective between October 29 and December 31, 2023.
  • In addition, the government has also procured an additional 2 lakh tonnes of onion for the buffer, over and above the 5 lakh tonnes already procured to curb the Onion price rise in India.
  • Onions from buffers have been disposed of continuously since August in major consumption centres all over the country.
• Prediction: The onion shortage issue could persist till next two months, lasting until December when new kharif stocks are expected to enter the market.

India’s Onion Production: Varieties, Conditions, and Export Success

Look at the Insights into India’s onion production, including its diverse varieties, climatic preferences, and significant export volumes, particularly to neighboring countries and Southeast Asia.

• Growing Season: India is the second-largest onion-growing country in the world. The Indian onions have two crop cycles, first takes place between November to January and the second harvesting between January and May.
• State-wise Production: Maharashtra, Karnataka, Madhya Pradesh, Gujarat, Bihar, Andhra Pradesh, Rajasthan, Haryana and Telangana are the largest onion producing states in the country.

• Varieties of Onion Grown: Agrifound Dark Red, Agrifound Light Red, NHRDF Red, Agrifound White, Agrifound Rose and Agrifound Red, Pusa Ratnar, Pusa Red, and Pusa White Round. 
  • Tana F1, Arad-H, Suprex, Granex 55, HA 60 and Granex 429 are varieties of yellow onion which are suitable for export.
• Climatic Conditions: Onion is a temperate crop but can be grown under climatic conditions such as temperate, tropical and subtropical climate. 
  • They cannot tolerate extreme conditions.
  • Areas with low (< 650 mm) or heavy rainfall (>750 mm) are not suitable for onion production.
  • It needs an optimal temperature of 13-24˚C for vegetative phase and 16-25˚C for bulb development.
• Soil Nature: Onions can grow well in sandy loam, clay loam, silt loam and heavy soils. However, deep, friable loam and alluvial soils with good drainage, moisture holding capacity and sufficient organic matter support a good crop.
• Onion Exports from India: During the fiscal year 2022-23, India has exported 2,525,258.35 MT of fresh onion to the world, worth Rs. 4,522.79 crore/ 561.38 USD Millions.
• Export Destinations: India’s biggest onion export destinations include Bangladesh, Malaysia, United Arab Emirates, Sri Lanka, Nepal and Indonesia.

Factors Driving High Onion Prices: Climatic Challenges and Seasonal Demand Surge

Understand the Onion prices surge due to increased demand during festivities and crop losses from both excessive and insufficient rainfall across India

• Rising Demand: Due to the upcoming festivals and wedding seasons, the demand for onion has grown substantially, leading to Onion price rise.
• Destruction due to Heavy Rains: Unseasonal heavy rains in many parts of the country have destroyed large areas of onion crop, leading to shortage of stocks across wholesale markets which has a ripple effect on onion price.  
• Destruction due to Low Rains: In southern states of Karnataka and Andhra Pradesh, the sowing of onions during kharif seasons dwindled due to shortage of rainfall.

Strategies to Mitigate Soaring Onion Prices: Export Taxes, Buffer Stock, and More”

Strategic measures including export taxes, buffer stocks, anti-hoarding efforts, subsidized selling, price monitoring, and imports are adopted to stabilize onion prices in the domestic market.

• Export Tax: Imposing a Minimum Export Price (MEP) on onions can discourage farmers to export onion produce, leading to availability in the domestic market.
• Buffer Stock: The government buys onion from producers and releases it in wholesale markets to reduce prices.
• Controlling Hoarding: Adopting measures to prevent illegal hoardings can play a vital role in obtaining fair prices for end consumers and stop rising onion price.
• Subsidized Selling: The government can sell onions at subsidized rates through its undertaking so as to reduce the burden of price rise.
• Regular Monitoring: Prices of basic consumable goods such as onions must be regularly monitored to understand the price trends and take steps accordingly.
• Imports: In order to keep prices under check, onions can be imported from countries where the prices are lower. This will boost supply.

Conclusion:

Onions are central to India’s food culture as well as the rural economy. The price range of onion must be such that it gives profitable returns to the cultivator and affordability to the end consumers.