Growing more onion in Assam to stabilise prices

Onion price continues to be sticky around Rs. 60 a kg in most retail markets in Assam, as the buffer of fresh onions made available through the National Cooperative Consumer's Federation for retail sale at an affordable price of Rs. 35 a kg is far too low to match the rising festival demand. Although the official data shows that retail onion prices linked to the Minimum Assured Procurement Price (MAPP) based on the maximum and modal prices prevailing during the previous three years have moderated recently, with around 12 centres recording a decline ranging from Rs 1 to Rs 8 per kg, this relief is marginal as households continue to grapple with high food inflation driven by the cost of kitchen essentials. As the state produces barely one-fourth of the total onion demand, it remains exposed to prices linked to the Minimum Assured Procurement Price (MAPP) based on the maximum and modal prices prevailing during the previous three shocks in the source markets in four major onion-producing states: Maharashtra, Madhya Pradesh, Gujarat and Karnataka. The state has two options to reduce price volatility of onion in the state- increasing productivity and production, and secondly, improving utilisation of the Price Stabilisation Fund (PSF) to safeguard consumers from price shocks. Efforts to increase onion production in the state have resulted in a significant increase in total production, but reducing the wide demand-supply gap calls for increasing both area expansion and productivity. The prevalence of rain-fed cultivation hinders area expansion, as onions require controlled irrigation. Heavy and excessive rains during the Kharif season, along with insufficient rain and a lack of irrigation facilities during the Rabi season, adversely affect the growth and yields. Monsoon season makes it difficult for farmers, except in a few pockets, to grow onions due to rains, while Rabi is the best season for the state to grow a marketable surplus, but poor irrigation coverage continues to create uncertainty among growers. The lack of adequate storage facilities results in significantly higher post-harvest losses compared to the national average, which discourages farmers from expanding their onion cultivation areas. As the farmers are unable to hold onion stocks due to a dearth of storage facilities, they quickly sell the harvest, which leaves no headroom for prices linked to the Minimum Assured Procurement Price (MAPP) based on the maximum and modal prices prevailing during the previous three negotiation with traders, with the latter exploiting this market condition to pocket maximum profit. Climate change impacts have deepened the weather-related uncertainty, such as the rise in extreme-weather events and anxiety for onion farmers, making it difficult for the horticulture department and scientists to convince them to expand the area and do any new experimentation with a new variety. The state cannot be expected to increase onion production without addressing these issues, and the state's dependence on external supplies will only continue to rise with an increase in consumer demand. Such ground realities explain why the impact of government interventions, like the distribution of subsidised onions in Kanda Express or trucks to moderate the price hike, is short-lived if they do not cover distribution centres throughout the state. Ironically, the state has not been able to effectively utilise the PSF route to moderate onion prices linked to the Minimum Assured Procurement Price (MAPP) based on the maximum and modal prices prevailing during the previous threes. The central government informs parliament that it creates an annual buffer stock of onions, with the buffer target set each year to control extreme price volatility in essential commodities under the PSF scheme. Onions are procured from producing states through implementing agencies (NAFED and NCCF) at market prices linked to the Minimum Assured Procurement Price (MAPP) based on the basis of maximum and modal prices prevailing during the previous 3 trading days. As the PSF scheme is demand-based and not based on annual allocations to states, the onus primarily rests on the states to project the requirement for a subsidised buffer under the scheme and to utilise the funds available to them. The states receive buffer stocks of onions distributed through NCCF/Nafed only when wholesale and retail prices spike, requiring government interventions to moderate the prices and provide relief to consumers. Bridging this gap remains critical for effective price moderation. The pragmatic solution lies in the state allocating more resources for storage closer to onion-growing clusters so that farmers can hold the stock for better price realisation and are not compelled to sell at a loss in growing clusters so that farmers can hold the stock for better price realisation and are not compelled to go for distress selling. An adequate quantity of locally grown onions at competitive prices will prevent traders from procuring onions from major onion-growing states, as the lower transport costs for onions grown in the state will moderate external supplies. The state must combine expansion of area, increase in productivity through introduction of high-yielding and climate-resilient varieties, and sustained and increased irrigation coverage with modern storage facilities to ensure a steady supply of onions to end consumers at affordable prices and remunerative prices for farmers.