Ad hoc Steps Must End

Business Standard     28th October 2020     Save    

Context: Spike in the prices of onions has become almost an annual feature.

Ad hoc steps taken to solve spike in onion prices

  • Blocking exports
  • Incentivizing imports
  • Capping the stocks allowed to be kept by traders

Problems related to these Ad hoc steps

  • Issues with the buffer stock:
  • Stockholding limits are imposed despite the removal of onion from the list of essential items:
  • Flawed management of available stocks is the genesis of the price volatility.
  • Government’s restrictive policies inhibit the storage of onions and are pro-consumer, and  entrepreneurs don’t invest in onion storage infrastructure for fear of being viewed as hoarders
  • Restricts farmers’ choices:  Ban on exports denies farmers freedom of choice to sell their products to anyone and anywhere 
  • Issues with incentivizing imports
  • Vital fumigation and phytosanitary requirements have been set aside, risking the introduction of new pests and diseases.
  • Farmers will be denied fair returns for their produce due to high imports, and low prices would act as a disincentive for farmers to expand onion plantings.

Way Forward:

  • Boost the production of rabi crop: since matures in April-May and is relatively suitable for storage because of the low moisture content of the onion bulbs. 
  • Promote value-addition: Dehydration and processing of onions into value-added products like onion puree are the other means of prolonging the consumable life of onions.
  • Deploy consistent and stable marketing and trade policies: which can spur farmers to increase production and entrepreneurs to invest more in storage, dehydration, and processing of onions.