Onion prices have crashed in Maharashtra and farmers are despairing

The sharp scent of onions drifted from the Agriculture Produce Market Committee compound at Lasalgaon in Maharashtra, and assailed even passersby on the road outside.

On Wednesday, inside the compound, auctioneer Kantilal Andade shielded his mouth with a handkerchief, took a deep breath, and set off along a line of around 40 stationary trucks and vans, each piled high with relatively small rabi onions.

The Lasalgaon Agriculture Produce Market Committee is the largest onion market in India. It serves as the benchmark for onion prices across the country. Even on slow days, the market, which is just 60 km away from Nashik in western Maharashtra, hosts at least 900 trucks, each bearing around 10 quintals of onions.

As Andade moved from one truck to the next, reciting a litany of bid calls, farmers swept their onions to the ground to better display the quality of the produce inside the trucks. Traders, who had already assessed the trucks before Andade began his bidding calls, waited idly until he reached the spot where they stood. A market committee representative noted each final bid in his notebook.

Andade worked fast. He dispensed with an entire row of around 40 trucks in just 30 minutes. When this reporter visited the market, Andade rarely called beyond Rs 350 per quintal, or Rs 3.5 per kg.

The rate is in stark contrast to rates a year ago, when prices soared to Rs 4,130 a quintal. This caused panic among consumers. The government then stepped in to import onions and cracked down on hoarders and exports to lower prices.

A year later, on August 26, a farmer dumped 13 quintals of onions, claiming that traders had bid only Rs 5 per quintal for them.

The full range of bids at Lasalgaon now varies between Rs 100 and Rs 600 per quintal, or between Re 1 and Rs 6 per kg. Onion prices have not fallen so low since 2010, but there seem to be few indications that the government will intervene in significant ways this year.

Farmers are irked

“Onion prices were low in 2010 also, but then we were still fine because inputs cost less then,” said Vinod Taskar, a farmer who has five acres of land in Rui, a village in Niphad taluka in Nashik district. Since then, he said, seed prices had gone up by Rs 200 to Rs 300 per bag. The cost of fertilisers and insecticides had also appreciated by Rs 100, he said.

Even though Taskar is aware that onion is a risky crop to sow, he said he had few alternatives. The government, he said, has done little to offset his losses.

But how have prices swung between such extremes in just a year?

There are several answers.

One reason is simple: overproduction. Due to the drought, several farmers in the Nashik region, who sell their produce at Lasalgaon, shifted away from water-guzzling sugarcane to onions, which require far less water.

“Sugarcane needs 13 months of constant water supply,” explained Mandli, a farmer. “Onions need to be watered maybe six or seven times, or even just four if there has been rain. So we made over a part of our land for onions.”

Mandli, like other farmers, had sowed onions, banking on the hope that they would continue to fetch moderately high prices, as indeed they consistently have for at least five years now. Instead, he faces a grave loss now.

Prices are not likely to increase any time soon. Lasalgaon dominates the market during the rabi season. The first of the kharif harvests have now begun and since the beginning of September, batches of red onions have begun to hit Bengaluru’s markets, prompting traders from Maharashtra to begin trading from there.

No hope from exports

Domestic demand has been sated, but even exports, which might otherwise have provided an alternative market with which to ease the supply, have not affected demand.

In August 2015, in an attempt to lower onion prices, the government had raised the minimum export price to US$700 per tonne. Once prices declined, the Centre removed export restrictions by the end of December.

But this did not help raise exports, said Nitin Jain, a trader registered with the Lasalgaon market committee, who supplies onions for export.

Iran, Pakistan and Sri Lanka also grow onions, the primary buyers for which are the Gulf countries.

“There is no demand from anywhere,” said Jain. “Not in domestic and not from any other country. Every country that grows onions has an overflow of crops. Even domestically, the prices have not gone so down in the last five to seven years.”

Glut warning

The government should have known well in advance that there would be a glut of onions. The National Horticultural Research and Development Foundation predicted as early as January that the acreage for rabi onions would increase by as much as 20%, resulting in a possible record onion production.

Jayadatta Holkar, the chairman of the Lasalgaon Agriculture Produce Market Committee, said he wrote to the Maharashtra government warning them of an impending glut of supply in the beginning of August and asked them to begin the procedure of procuring onions.

“If the government takes responsibility when the prices are high, then it should also interfere when prices are low,” Holkar said. “If it doesn’t do either, then the farmer won’t complain because he will think it is just the market working. But when the government takes decisions only for the customer, of course farmers will think it is taking sides.”

On August 30, chief minister Devendra Fadnavis announced that farmers would be paid compensation of Rs 100 per quintal for onions sold in Agriculture Produce Market Committees in July and August.

But Mandli said that this was of little help as few farmers sell in June or July, and sales pick up only in August and September. Besides, few sales were made at the Lasalgaon wholesale market at that time. Traders there had been on strike for 25 days in July, in protest against the government’s decision to end the practice of farmers paying traders a commission to ensure that their produce was bought at the auction.

“Channel people (the media) talk about onions when rates are going up, but not when we are affected,” said Mandli. “The APMC was shut for 25 days in July, but farmers could not do anything. Now money keeps going out of our houses and nothing is coming in.”