Why (Holy) Onion should be more expensive than Chicken, Egg and Milk in India?

Why (Holy) Onion should be more expensive than Chicken, Egg and Milk in India?

By:

Vijay Sardana

This is a great time to talk about simple insignificant vegetable like Onion when everyone is talking about new launches of iphones, ipads, tablets and new Blackberry messenger. Have you ever seen a newspaper articles on same page talking up rising onion prices and falling prices of mobile and tablets? Pick-up todays newspapers and read them. This is called power of Onion.

In last few days, all leading newspapers and TV channels are talking about price rise and food inflation in India. The talk of the town is Onion, because India is the only country where onion prices are political issues and in past government lost elections due to excessive onion prices.

The biggest concern is everyone is talking about high onion prices but no one is doing anything about it?

Let us understand some fundamental issues about Holy Onions…Why onions are holy because on every important Hindu festival many Indian families do not ‘slaughter’ onions. Families in India avoid consuming onion on important fasting and festival days not because of price but because of religious reasons.

Where are the onions?

According to National Horticulture Board, India produces 17.5 million tons of onion, please see the table below.

Area, Production and Productivity of Onion in India (2011-2012)  

State	Area	Production	Productivity
	('000 ha)	(in '000 MT)	(Ton/ha)
Maharashtra	382.00	5,638.00	14.76
Karnataka	177.20	2,451.20	13.83
Madhya Pradesh	88.07	1,957.00	22.22
Gujarat	61.30	1,562.20	25.48
Bihar	53.81	1,236.74	22.98
Andhra Pradesh	48.52	824.77	17.00
Rajasthan	73.46	664.22	9.04
Haryana	27.45	589.83	21.49
Tamil Nadu	37.12	556.45	14.99
Orissa	35.16	418.99	11.92
Uttar Pradesh	23.69	383.47	16.19
Jharkhand	15.70	318.19	20.27
West Bengal	21.68	304.56	14.05
Chhattisgarh	13.94	222.21	15.94
Punjab	8.24	182.69	22.17
Jammu & Kashmir	2.85	65.27	22.90
Uttaranchal	3.81	39.27	10.31
Himachal Pradesh	2.20	36.30	16.50
Assam	8.12	23.97	2.95
Delhi	1.30	22.86	17.58
Mizoram	0.48	4.38	9.13
Meghalaya	0.45	3.74	8.31
Nagaland	0.40	3.10	7.75
Sikkim	0.30	1.64	5.47
Pondicherry	0.01	0.05	5.00
Total :	1,087.26	17,511.10	16.10

Source: National Horticultural Board (http://nhb.gov.in/area_production.html)

Exports are just 10% of total production:

Out of the total production of about 17.5 million tons, about 1.8 million tons is exported. According to data available, The average price of export is about 12.60 per kg.

Export of Onion from India

Year	Qty	Value
	(MT)	(Rs lakhs)
2001-2002	506,924.00	41,140.53
2002-2003	545,211.00	38,718.70
2003-2004	840,717.00	82,122.59
2004-2005	941,448.00	81,749.13
2005-2006	778,134.00	71,596.71
2006-2007	1,161,062.00	113,542.80
2007-2008	1,101,404.00	128,582.30
2008-2009	1,783,820.00	224,312.30
2009-2010	1,873,002.00	283,428.50
2010-2011	1,340,771.00	215,905.50
2011-2012	1,552,904.00	214,142.90
2012-2013	1,822,760.00	229,490.94

(Source: APEDA (http://agriexchange.apeda.gov.in/indexp/reportlist.aspx)

Major Onion Exporting Countries: China, India, Netherlands, Egypt, Iran, Turkey, USA, Brazil

India is a major onion exporting country in the world.

Major Onion Importing Countries :Sri Lanka, Malaysia, Maldives, Nepal, Dubai, Kuwait, Indonesia, UAE, Singapore, Seychelles,  Pakistan, Saudi Arabia, Qatar, Bangladesh

Humble and holy Onions are discovering its own value in society

According to Planning Commission, Government of India, about 30 percent perishables are wasted due to poor handling and transportation. Let me consider only 10 percent is wasted, it means 1.75 million tons is wasted. Therefore, the total onions available for consumers of India are about just 900 gms per person per month. This is less than edible oil consumption in India.

Now ask yourself, what you consume more, onions or edible oil. If edible oil is selling at 90 per kg, why onion prices should be less?

Is there any economic justification for the low onion prices? I think humble and holy Onions are discovering its own value in society, it is good development.

This is more or less like edible oil situation in India. In that case, what is wrong if Onion and edible oils are selling at same price?

What is the way out of this crisis?

Government of India should appreciate that industrialization and economic development cannot happen without food security. In food inflationary economy one can only witness lawlessness not industrialization, because both can’t go together.

1.    Learn and accept that we have a problem in food supplies

The problem is none of the policy makers read and lean about agriculture production issues and constraints that is why we see no interest and action on this front.

Have you ever seen Prime Minister ever talking that we are keen to bring new technology for onion production or food production (other than ICAR or agriculture events), but government is comfortable in talking about new technology for mobile phones.

Supreme Court and NGOs should answer how to reduce onion prices when we are among the lowest in onion productivity in the world. NGOs have answer to all the problems, why they are not providing the answer to common man’s problem.  It appears they are not impacted by food inflation because donors funding include the inflation factor, while sending the funds to NGOs.

Major Onion Producing Countries (2011)

Countries	Area	Production	Productivity
	(Lakh Ha)	(Lakh MT)	(T/ha)
Republic of Korea	0.23	15.20	66.16
United States of America	0.60	33.53	56.13
Spain	0.24	13.51	55.21
Netherlands	0.30	15.41	51.64
Japan	0.23	10.58	46.64
Egypt	0.64	23.04	36.16
Iran (Islamic Republic of)	0.70	24.97	35.79
Morocco	0.33	11.96	35.79
Turkey	0.65	21.41	32.73
Mexico	0.47	13.99	29.68
China	10.15	247.63	24.39
Brazil	0.63	15.23	24.00
Russian Federation	0.96	21.23	22.23
Ukraine	0.67	11.75	17.64
Myanmar	0.72	11.31	15.63
India	11.10	159.30	14.35
Pakistan	1.48	19.40	13.14
Bangladesh	1.28	10.52	8.22
Nigeria	1.92	12.38	6.45

2.    Policy reforms do not address core issues, they are just cosmetic in nature

All committees appointed by Government of India very clearly and boldly says reform APMC act. Allow farmers to liberate from the clutches of licensed traders under APMC act, because they are just rent seekers and prevent fair marketing practices. NO government except Bihar has taken stand on this.

The problem is that this is a mandatory law and every transaction brings lot of money to these traders without offering services to farmers.

Today this APMC act is used by state governments to extract money from the buyers for their own political agenda. Foods being an essential commodity, people have to buy food and governments will get its share.

Like in every tax system, there are gross violation and tax pilferage. That is why the amount of tax collected from these mandies are far short than what they should honestly collect considering the amount of commodities traded through these mandies.

In fact inflation suits them, because more the price more the commission.

World has changed, but not the laws and not the desire to exploit others:

Today farmer does price discovery through mobile and electronic media, but state governments and Government of India still feels, price discovery happened in APMC mandies.

Please visit your nearby mandi and see what role they are playing. You will be shocked to know that most of the APMC don’t even have the basic facilities and is in-fact acting as more problems creators than solution providers.

Is there any law by which office bearers of APMC has to declare their assets ever year? Are we saying there is no corruption when this is the biggest area of transaction of basic food?

Why Modern Retail trade and retail chains are of limited help in food inflation?

Now problem is multi-fold, if people go to mandi and pay tax honestly, they have to compete with the rest of the trade which is bypassing the tax. This cost difference due to APMC taxes is promoting imbalance between fair and unfair trade.

Now these illegal trade without tax is compete with legal trade which has already paid the tax. This is leading to serious distortion in the internal trade in commodity markets and trade including fruits, vegetables, grains etc. in India.

This is one of the reasons, why retail chains are not able to make much head way and contribution because they cannot compete with illegal trade on one side and government regulations on the other.

Why investment is not happening in supply chain infrastructures?

When Government of India is not keen to ensure level playing field in commodity trade and discourages volume trade by introduction of APMC Act and Essential Commodity Act. Where is the incentive for anyone to invest in backend infrastructure and educate the farmers about better technologies? Why they should go and deal with farmers when law creates complications in smooth operations.

Unless Government is serious about reforming and eliminating distortions created by her own laws, no sensible person will invest in infrastructure like Cold storage etc. The only way one can make money in cold storage business is either by having huge mark-up to offset all transactions cost created by government rules and policies or by creating innovative method which very often are not legal and fair.

What one can do?

When you go to market and pay heavy price for food or when you read food inflation. Consider this as a gift of Government of India to you. Take it or leave it choice is yours.

I have only one suggestion, unless you control food inflation no other sector of economy will perform and India’s foreign policy and economic policy will always be under pressure of multinational and international forces.

Request to Prime Minister and Chief Ministers:

Please first implement the 1^st recommendation of the 1^st Inter-Ministerial Group on Inflation, before expressing concern about common man and inflation. I think it is high time for action after many interactions.

Click here to read the report: http://finmin.nic.in/workingpaper/IMG%20on%20Inflation.pdf

I am sure you must be having better ideas about how to control food inflation, please do share.

Feel free to circulate and post your comments to create healthy debate about food inflation...