Onion prices skyrocket in Aug-Nov every year; govt must review buffer stock policy: Economic Survey
Expressing concern over a sharp rise in onion prices during August-November every year, the Economic Survey recommended review of the government's buffer stock policy, adding that the key kitchen item should be stored in modern cold storage facilities and distributed timely to reduce wastage of huge quantities.
The pre-Budget Survey also said the government should promote the use of dehydrated onions that have longer shelf life for buffer stock purpose, while the hydrated variety should be sold early.
Onion prices had skyrocketed to as high as Rs 100 per kg in the retail markets few months back, forcing the government to ban exports, allow imports and impose stock limits. The exports curbs have been lifted now with softening of prices.
While analysing onion price seasonality and effective policy measures in great detail in the report, the Survey rued that the prices skyrocket despite the government's efforts to create a buffer stock for selling onions in case of rise in retail prices.
This exposes "the absence of a suitable policy to ensure price stability of India's staple vegetable".
"Review of onion buffer stock policy is essential. System needs to be developed to reduce wastages, efficient management and ensure timely release," the report said, while suggesting measures to keep prices under check through the year.
The report pointed out that co-operative Nafed, which procures onions on behalf of the government, created buffer stock in 2019 of about 58,288 tonnes, of which around 18,808 tonnes were damaged. About 25,000 tonnes are likely to be damaged in 2020.
"Rabi (winter-sown) harvesting takes place between March and May in most states and the crop is sold during June-July period, kharif (summer-sown) harvesting takes place between October and November and the crop is available in the market till rabi harvest. The period between the two that is August to November is when we observe the prices of onion rise sharply," the document reasoned.
Stating that the government has taken various proactive measures to curtail onion price rise, the Survey highlighted that stock limit was imposed on November 23 last year under the Essential Commodities (Amendment) Act 2020 (25 tonnes for wholesalers and 2 tonnes for retailers) till December 31.
The Centre banned onion exports on September 14, 2020, offloaded buffer stocks, and directed MMTC to import.
On the effectiveness of government measures, the Survey pointed out that in 2019, Nafed created buffer stock of about 58,288 tonnes, out of which around 18,808 tonnes of onions were damaged, 33,313 tonnes were distributed in the local markets due to being of sub-standard quality and only 6,167 tonnes could be distributed to states.
This time, Nafed has created around 99,000 tonnes buffer stock, out of which 25,000 tonnes are likely to be damaged. Stocks actually distributed to states are still low at 11,653 tonnes (till November 2020).
"NAFED stores its buffer stock of onion using traditional methods, as opposed to cold storage, leading to the wastage," it said.
As per the data, every year almost 100 per cent of the stock procured is stored in traditional and conventionally designed storage facilities. In 2020, approximately 15 per cent of the stocks are stored in modern and equipped storage facilities as popularised by the National Horticultural Research and Development Foundation (NHRDF).
The wastages are further aggravated due to adverse weather conditions like untimely rainfall and excess moisture.
Moreover, Nafed procures and stores onion mostly in three states -- Maharashtra, Madhya Pradesh and Gujarat. This concentration of stock storage in just three states makes it more susceptible to adverse weather shocks.
"Moreover, this doesn't allow for immediate action when needed, in fact delays it. A decentralised system of procurement and storage with proper tracking can make the system more robust," it added.
Listing out suggestions to deal with this situation, the Survey said the Nafed should adopt transparent process in seeking requirement from states so that onions can be distributed on time and prices remain under control.
"There should be a transparent online platform where all information relating to requirement details by states, procurement undertaken state wise and month wise, amount disbursed state wise, agency wise, month wise should be made available for better planning and decision making," the document said.
In Maharashtra, Gujarat, Haryana, Madhya Pradesh and western Uttar Pradesh, large-scale storage of onions is done in conventionally-designed structures. In other states, the storage is done only on a small scale but is now showing an increasing trend after post-harvest technology and improved storage structures have been popularized by NHRDF.
"Traditional storage practices result in substantial losses in stored onions, hence use of improved storage structures as well as use of good storer varieties, judicious use of fertilisers, timely irrigation and post-harvest technology are essential to reduce the losses in stored onions (Operation Greens portal)," it said.
The survey also suggested developing an eVIN (electronic vaccine intelligence network) like tracking system.
"For onion supply we do not need such a complicated system but a simple tracking system based on the principles of eVIN might be adequate. This can help provide real-time information on onion stocks, track storage temperature and moisture level and alert the authorities whenever any parameter is breached," it said.
