Why Are Farmers Upset Over Ban On Onion Export And Fixing Of Stock Limit

Onion farmers, particularly in Maharashtra, are upset over the Union government’s decision to ban exports of the vegetable. They are also irked over the stock limits brought in by the Centre to rein in rising onion prices.

Farmers have demanded that the government do away with the export ban and the stock limit. They have threatened to boycott the agricultural produce marketing committee (APMC) yards where they sell their onions if their demands are not met.

There are reasons for the farmers' anger over the Centre’s ban. The growers are getting a good price for their produce after over five years.

In 2014, onion prices had galloped to over Rs 50 a kg before the Centre stepped in to bring them under control. During 2010-11, onion prices touched a high of Rs 100 a kg.

Though prices have not touched those levels now, they have increased to Rs 80 a kg in some retail markets. The spike in onion prices has caused concern for the Narendra Modi government.

The government wouldn’t want onion prices to rise in retail markets as the vegetable has proved to be the Bharatiya Janata Party’s (BJP) undoing at the poll hustings. High prices of onion, it is widely believed, brought down the BJP government in Delhi and Rajasthan in 1998.

In 2010-11, onion prices hit a record high because of a cartel in Nashik. In 2014, when prices started rising, the Centre signalled to the cartel that it wouldn’t be able to get away by spiking the rates.

Even in 1998, a cartel was behind the spike in the onion prices. Since July 2014, onion prices in APMC yards have ruled below Rs 500 a quintal.

In contrast, the modal price or the rate at which a majority of the 5.5 tonnes of onion that arrived at the Nashik APMC on Thursday were sold at Rs 2,900 a quintal. The modal price rose to a season-high of Rs 4,200 a quintal on 20 September.

Last year during the same period, the highest modal price for onion was Rs 1,200 a quintal. Onion prices tend to rule high during September since stocks with traders and farmers are low.

In India, onions arrive in the markets thrice a year. First is the Kharif arrival that begins sometime in late September, with crops from Karnataka hitting the market. Maharashtra onions arrive in later in October.

There is also a late Kharif onion arrival around the first week of December. The third arrival is the rabi onion that hits the market from April onwards.

Of the three arrivals, rabi onion has a longer shelf life. It can last up to six months.

This year, heavy downpour during August and September has resulted in many parts of the country being flooded. The floods have not only damaged onion crops but also delayed the arrival in Karnataka and Maharashtra.

The second reason for the surge is that growers have cut down the acreage during this year's Kharif season, resulting in a lower crop.

Growers chose to lower the acreage as they had received non-remunerative prices last year after production increased a tad from 2017-18 to 23.8 million tonnes.

While the rise in onion prices seems justified, there is a lurking suspicion that the cartel is trying to put pressure on the Centre through the farmers now.

One can understand the reason for farmers to demand the lifting of the ban on onion exports since they are fetching a good price after a long time.

Reports say that the high prices for onions had helped farmers of Kalwan taluk in Maharashtra to buy 250 tractors on a single day. They have also bought over 20 cars and nearly 500 two-wheelers. No doubt, higher prices for growers means a boost to the rural economy.

But why are they asking the government to do away with the stock limit? The stock limit for a retail trader is 10 tonnes and for a wholesale trader, it is 50 tonnes.

Wouldn’t holding the produce in such quantities and not releasing it for consumption push up the prices?

These traders are already making a neat margin — retail prices are nearly double the rates at which onion is sold at APMC yards. For example, if onion prices are ruling at around Rs 30 a kg, the vegetable is sold at nearly Rs 50-60 a kg.

Second, why should farmers demand the removal of the measures in Maharashtra when arrivals of Kharif onion are a couple of weeks away? This year, arrivals are delayed due to rains in the growing areas.

A rise in onion prices when the crop is due for harvest can have some negative fallout.

Farmers could pull out immature crop to take advantage of the price and bring it to the market. This can affect the quality of the onion.

Probably, the Centre can call the bluff of the cartel by lifting the export ban and reintroducing the system of fixing a floor price for shipments abroad. It could, however, retain the stock limit until it feels comfortable with the retail prices.