Sound basis for agri-trade
A myopic storage policy is the reason behind onion supply crisis.
26 Nov 2017 3:44 PM GMT
The advent of winter in the North is normally greeted with an abundance of green vegetables at affordable price to the aam aadmi but what is now visible in the local vegetable market is the vertiginous rise in the prices of popular vegetables such as peas (matar) and the widely consumed common people protein, the onion. The bulbous root which is a part and parcel of the indigent people's wonted daily diet is now woefully absent as its cost at the retail level is swinging between fifty to sixty rupees per kilogram. In the past too, onion price spike had unseated governments in the State such as Delhi and this time around on the eve of the two keenly watched and contested Assembly Polls in Gujarat and Himachal Pradesh, the tear jerker hardly evoked any mention in the campaign! But this is in no way detracting the inordinate spurt in onion prices in the major wholesale markets like Lasalgaon in Maharashtra to the dismay of its regular users pan-India and particularly so in the North.
It was only in summer this year (May-June) when farmers had to do distress sales of onions at around two rupees per kg in several mandis in Madhya Pradesh, the second largest producing State after Maharashtra in the country. The situation was fraught and tense when farmers took their fight to the streets to highlight their plight and police fired at them, causing some unfortunate deaths. Realizing the rickety situation, the MP Chief Minister swiftly declared a decision to procure onions at Rs 800 per quintal, spurred by the sensitivity of the issue. The State lost little time in procuring 8.76 lakh tonnes. As the farm expert Ashok Gulati and former Secretary, Ministry of Agriculture Siraj Hussain wrote in a monograph recently that in the absence of adequate storage capacity in the state, onions had to be quickly disposed off through the public distribution system and open market sales at well-nigh one-fifth of the cost. They said the whole operation entailed a loss of Rs 785 crore to the MP government.
They contend that the State which in its budget for 2017-18 earmarked just seven crore of rupees as grants to food processing industries would have been well advised to spend more on setting up onion dehydrating units for promoting demands for such onions among restaurants, fast food chains, army and hospitals, besides sparing a few tonnes for the overseas markets to earn the foreign exchange. One can only describe the entire episode played out by the MP government in the case of onion to mollify the distressed farmers as pennywise and pound foolish on hindsight.
It is also revealing to note that in a written response to a query in the Lok Sabha on July 25, 2017, the Minister of State for Agriculture and Farmers Welfare S.S. Ahluwalia said that "horticulture produce is highly perishable in nature due to higher moisture content and could not be stored in ambient temperature for longer span with many of them not amenable to be stored in cold storage for sustained period". Incidentally, about 60 per cent of onion production is in the rabi season, sown in December-January and harvested in April-May. Production of onion is estimated at 21.7 million tonnes (against 20.93 million tonnes in 2015-16), next only to China and accounts for 20 per cent of global production. So the massive arrival of the produce in a glut season had depressed wholesale prices in the summer and that is the reason why the prices of onion plummeted to the nadir in April-May.
But this trend could not be elongated any further against the bleak backdrop of a lack of adequate storage facilities that had not kept lock step with escalating output. It is also revealing that in the same Parliament question as mentioned above, the Minister said that the government is implementing Mission for Integrated Development of Horticulture (MIDH) for development of horticulture which also extends assistance for storage of horticulture through setting up of cold storage and low-cost onion storage.
For perishable horticulture produce, the Government provides credit linked back-ended subsidy at 35-50 per cent for setting up of cold storage. For the establishment of low-cost onion storage at farm level of capacity up to 25 metric tonnes, subsidy at 50 per cent for maximum permissible cost of Rs 1.75 lakh per unit is available. So far under the scheme 12,566 number of onion storage with capacity of 2.48 lakh metric tonnes has been established. Considering the fact that the onion production is 21.70 million tonnes in 2016-17, the creation of just 2.48 lakh metric tonnes storage capacity is not even the tip of the tall order on hand and is reflective of the challenges ahead if a smooth road for empowering onion farmers is to be ensured in a reassuring fashion.
Be that as it may, the Centre's agricultural trade policy is not tuned to modern commercial calculations. Intervening to rein in inflation by enabling the unhindered import of farm commodities and clamping ban on exports when domestic prices zoom, is now past its rationale. Still, the Government has not hesitated to impose a minimum export price (MEP) of 850 dollars per tonne in its bid to ensure adequate domestic supplies and preclude a spike in the price of onion recently as a reaction to spike in domestic onion prices. Besides, the state-owned MMTC has been tasked to import 2,000 tonnes of onion, while the Small Farmers' Agri-Business Consortium (SFABC) and NAFED have been asked to make domestic purchases to supply in the consuming places through their sales outlets!
While there is nothing wrong in this type of intervention to use trade policy as a tool to tame the market, wisdom lays in advance action plan so that in case of a bumper crop, export can be stepped up and in case of paucity, imports can be contracted by availing of advance crop estimates in a rational manner. Without such a forethought any reaction to emerging situation as it is being done in an ad hoc manner is bound to entail losses to the exchequer besides commercial calamity to the contracting entities. It is also time the authorities learnt to ramp up sufficient investment in modern storage amenities and processing facilities so that the onion growers need not shed tears interminably over their incredibly fluctuating fortunes!
(The views expressed are strictly personal.)
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