Economy
Government to rope in Railways to rein in sky-high onion prices
Summary
- It plans to switch from trucks to trains to speed up deliveries ahead of state assembly elections and the festive season.
New Delhi: Stocks of onions may be moved around by rail instead of by road so that they reach the markets faster, two people aware of the government plan said, amid runaway prices of the Indian kitchen staple.
Although the buffer is enough to meet demand, onions are currently being transported by truck—the usual mode—crimping supplies and slowing deliveries.
The government plans to switch to rail in order to speed up deliveries, especially to cities, ahead of state assembly elections and the festive season.
The idea to rope in the services of Indian Railways was described as a first.
“The consumer affairs ministry is in talks with the Railways to secure rakes for transporting onions from Nashik and other onion-producing areas to cities such as Ranchi, Guwahati, Delhi-NCR (National Capital Region) and Lucknow. This initiative is intended to help cool down the rising prices," the first person said.
The proposal is in the final stage and likely to be finalized soon, this person said.
Currently, the government is selling subsidized onions at ₹35 per kg across the country.
According to consumer affairs ministry data, onion prices are now averaging ₹53.46 per kg in the open market, compared with ₹33.72 per kg a year ago, posing a challenge to the National Democratic Alliance government to keep a check on inflation during coming assembly polls in Haryana and Maharashtra.
The retail onion price in Delhi was ₹58 per kg on 25 September, compared with ₹38 per kg a year ago, the data showed.
In Mumbai, prices have risen by 74.3%, reaching ₹61 per kg from ₹35 per kg, while in Chennai prices increased by 70.3%, from ₹37 per kg (2023) to ₹63 per kg on 25 September.
In Ranchi, the price has surged by 100% to ₹60 per kg from ₹30 per kg a year ago, the data showed.
Onions, tomatoes and potatoes are key contributors to food inflation.
The price of onions started rising following the government’s decision to scrap the minimum export price (MEP) of $550 per tonne on 13 September and halve the 40% export duty imposed on onion shipments.
As of now, onions are transported to different cities by trucks, which can carry a maximum load of 25 tonnes and take three to six days to reach their destinations.
The plan is to offload a large quantity of onions using goods trains that have the capacity to carry about 1,700 tonnes, the first person said.
Once the onions reach the destination, they will be transported by road to mandis.
“The domestic market is being disrupted by the government’s frequent policy changes. In an attempt to gain ground in upcoming elections, they should avoid destabilizing traditional markets," Ramesh Chandra Lahoti, president of the Federation of Karnataka Chambers of Commerce and Industry, told Mint.
“The focus should first be on addressing the needs of Indian markets. Policies cannot be changed on a whim. This is negatively impacting the retail market," said Lahoti.
Price pressure
K. Venkatesh, a Bengaluru-based onion exporter, claimed there is a shortage of onions in the market, which is driving up prices.
Besides intervening in the wholesale market, the ministry will continue to sell discounted onions at ₹35 per kg through vans operated by the National Cooperative Consumers Federation (NCCF) and the National Agricultural Cooperative Marketing Federation (Nafed) across the country.
“By this, we aim to bring the retail price of onions to below ₹50 per kg and maintain it there until the arrival of kharif onions, which are expected to hit the markets in November," the second person said.
The ministry has a buffer stock of 470,000 tonnes. Since it began selling subsidized onions on 5 September, it has released over 15,000 tonnes of it.
Recently, consumer affairs secretary Nidhi Khare indicated that scrapping the MEP could lead to a rise in onion prices.
“We anticipated a price surge after lifting the export duty. With our 4.7 lakh-tonne buffer stock and increased kharif sowing area, we expect to keep onion prices in check," Khare had said on 23 September.
Also read | Onion production may fall 20%, potato output by 5% in 2023-24, shows third advance estimate
Excessive rainfall activity in onion catchments and the subsequent flood situation have impacted onion prices, said Anand Ramanathan, partner, consumer products and retail sector leader, Deloitte India.
“The onion availability scenarios are closely monitored, and we will see reserve stocks being offloaded by the government to ease the situation," said Ramanathan.
“The key to avoiding such situations is to spread the cultivation of the crop and promote varieties that are relatively more resistant to extreme weather conditions," Ramanathan said.
Queries emailed to the ministries of consumer affairs and the Railways remained unanswered at press time.
The major onion-producing states are Maharashtra, Karnataka, Madhya Pradesh, Gujrat, Bihar, Andhra Pradesh and Rajasthan. The key onion-growing districts in Maharashtra are Satara, Nashik, Jalgaon, Pune, Solapur and Ahmednagar, which account for about 94.68% of the state’s total area under onion cultivation. Major onion-growing regions in Karnataka include Belgaum, Bijapur, Bagalkot, Gulbarga, Dharwad and Bidar.
