Of the various delectable vegetables that are produced in India, why does only onion evoke such frenzied responses in the media? Can we use this issue of volatility in onion prices to target the underlying deficiencies in the agricultural supply chain?
To answer the first question, two types of narratives have emerged:
1. The onion is often the only vegetable in a poor family’s diet and hence the prices of onions should not rise.
2. The onion is an essential supplementary ingredient in every family’s diet and hence price rises in onion end up stretching the family’s budget.
Regarding the first narrative, should we not ask why are so many people in India are able to afford only onions as a vegetable? Onion does have a very high shelf life, is easy to transport and is grown throughout the year in India which might partly explain its popularity. But what nutrition does it provide? Onion is made up of 89% water, the remaining being sugar, fiber, protein and fats in very small amounts. Thus, shouldn’t the right question in front of the government be about analyzing the reason for the weak nutrition levels and how to reduce the excessive dependence on this nutritionally modest vegetable? Should we not think about why are the other vegetables beyond the reach of a poor family? Are there any supply-chain issues that cause the prices to be high?
This brings me to the second narrative about onions being the essential part of every family’s diet. True, the onion has a pretty much inelastic demand and probably that is the reason why traders and middlemen have been able to use the situation to their advantage. This is where the government can play a positive role in the ‘free market’. Maharashtra supplies around 30% of India’s onions and when the state government issued warnings on raids against hoarding, the prices fell from 5%-22% across the country. This shows that the government needs to play a proactive role here to enable a marketplace.
This does not mean that the middlemen are detrimental to the agricultural system and can be done away with. The government does not have the capability to replace the supply chain established by individual players. To their defense, the traders allege that the farmers in order to cash in on the high prices have resorted to an early harvest with high moisture content. This has lead to a dead weight loss on further sale and also spoilage due to moisture. the government needs to focus on how this early harvesting can be managed.
India is the second largest producer of onion in the world even though its yield per hectare numbers for this crop are abysmal. This means that there is an extremely large area under onion cultivation – onions are grown throughout the year. Therein lies the hope that if onion cultivation is staggered across the various places, it can absorb the price variations.
Only genuine efforts like investment in irrigation and other agricultural infrastructural facilities to improve production can provide a long term solution.
Reference: Prices of Onions: An analysis by Dr. Purushottam Sharma et al