UPA sheds tears as onion prices rise

Aaishwari  Chouhan | SIMC Ink

Bribe for loan scam, JPC Probe, 2G Scam… the government had enough on its platter for the onions to add more tears. Beginning mid-December, onion prices which have generally been in the bracket of Rs. 30 – 40 per kg suddenly shot up to Rs. 70 – 85 per kg in retail markets across the country. According to government data, on an annual basis onions became costlier by 33.48%, whereas on a week-on-week basis, the increase was 4.56%.

The reason for the steep rise in the prices of onion is directly associated with the unseasonal rains that have hit onion farmers majorly at the onion hub of Lasalgaon in Maharashtra’s Nasik district. Nearly 70% of the crop has been destroyed in Lasalgaon. As against the earlier yield of 1,000 kgs per acre, the yield this season dropped down to about 15 kgs per acre. Added to this, hoarding has been a major contributor to the sudden price rise.

This sudden jump in prices of onion created panic not just amongst the consumers but also with the government. Rocketing of the prices to as much as Rs. 85 per kg in some markets forced the government to remove customs duty completely on the import of onions which was earlier pegged at 5%. In order to get the situation under control, export of onions was banned with immediate effect. Besides, some imported onions started reaching the market, ultimately contributing to a good fall of Rs. 10 in the per kg cost. Traders say that the ban on exports and duty-free imports can partially ‘fill the gap’ because almost 90% of the demand is met by domestic production.

Earlier last week, onion prices at retail outlets in New Delhi dropped to Rs. 40-50 a kg from an earlier drop of Rs. 50 – 60 per kg. There was a decline in the prices of onions in Kolkata and Chennai too. Prices of the commodity fell by Rs. 10 a kg and were ruling at Rs. 40-50 per kg in the two metros, depending on the quality. However, prices remained high in the financial capital of Mumbai, where the going rate was Rs. 60 – 75 per kg.

Further, it’s not just onions that are getting the consumers teary eyed. Prices of other vegetables like tomatoes, peas and garlic are on an upward spiral too in cities like Mumbai and Patna. This has also been linked to unseasonal rains in the major producing regions. As observed, food inflation has risen sharply for the third consecutive week and it was in this period that the vegetables had become costlier by almost 16%.

Explaining the reason behind the rise in food prices, Finance Minister Pranab Mukherjee said, “Some fruits, vegetables and milk have an element of seasonality in them and sometimes in the market, there is gap in the demand and supply of products, which leads to the increase in their prices… Ultimately, it depends on the series of the core chain.”

At a governmental level, Food and Agriculture Minister Sharad Pawar expressed expectation of a much better situation with the arrival of new crops.

It is the mandate of the food and agriculture ministry to ease the supply of agricultural items by way of meaningful intervention (export ban, cut in import duty etc.). However at the same time, caution also has to be exercised so that such policy intervention does not come in the way of international trade in such essential commodities, since it is only such commodities that constitute the all important trade and consumer basket in most sub-continental countries.

With scams to sort out and the inflation issue coming full circle, spiraling food prices was the last thing that the UPA needed to add to its woes. How the Govt. emerges out of this gripping tangle has now become a matter of increasing difficulty.

 

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