Onions in India are once more at the epicenter of a major controversy, pitting government officials who want lower prices against farmers that need extra income.
Prices of the vegetable, as ubiquitous as spices in Indian cooking, surged more than 200% in September from previous months after flooding from heavy monsoon rains damaged crops and reduced supplies. That’s prompted the government to ban exports and crack down on hoarding to lower prices, angering farmers who took to the streets on Monday in protest.
The onion, whose soaring prices have been blamed for bringing down past governments, puts Prime Minister Narendra Modi in a tight spot. During his reelection campaign this year, the premier promised to raise incomes for farmers, a key voting constituency that makes up more than half of the electorate. Yet Modi also needs to ensure inflation remains stable, and food prices are already spiking higher.
“The government could be caught in a dilemma, as while it seeks to keep food inflation contained, it also has a promise to raise farm incomes,” said Jason Yek, Asia Country Risk Analyst at Fitch Solutions. “Any measure to artificially depress the price of onions could spur a backlash from the onion farmers.”
Onions of Yore
This isn’t the first time onions have taken center stage in Indian politics. In 1998, high onion prices were cited for the Bharatiya Janata Party losing the vote in New Delhi. In 2013, onions were blamed for soaring inflation. Last year, Modi, in his campaign to gain reelection, said farmers are his ‘top’ priority, with ‘TOP’ meaning “Tomato, Onion and Potato.”
Onion prices in India climbed to as high as 80 rupees ($1.13) a kilogram in September, compared with 20 to 25 rupees in July through August. The gains are due to flooding, as well as because farmers reduced onion crops after prices fell to as little as 2 rupees per kilogram in Maharashtra in December, said Siraj Hussain, former farm secretary and a visiting senior fellow at the Indian Council for Research on International Economic Relations in New Delhi.
The government last month released onions from state stockpiles to Safal, the country’s largest organized retail network of fruit and vegetables, which will also cap prices. Authorities will monitor prices, and consider strict action against hoarding and profiteering activities. Exports of all varieties of onions are now prohibited, the government said on Sunday.
‘Penalized Farmers’
The efforts have started working and wholesale prices in some markets are starting to decline, with the arrival of new crop produce from the southern region also helping to ease tight supplies, according to a government official on Wednesday.
Devinder Sharma, a food and trade policy analyst in Punjab with 30 years of experience in food policies, says the government is panicking over surging onion prices. Farmers in some regions are getting paid 75% less for their onions after the export ban was introduced, he said.
“It is the farmers who suffer in the process,” Sharma said. “Farmers are being penalized to keep consumers happy. Inflation has to be kept low, but what happens to the millions of people that produce that food?”
--With assistance from Nasreen Seria.
To contact the reporters on this story: Anuradha Raghu in Kuala Lumpur at araghu3@bloomberg.net;Pratik Parija in New Delhi at pparija@bloomberg.net
To contact the editors responsible for this story: Anna Kitanaka at akitanaka@bloomberg.net, James Poole
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