Purchasing vegetables at a small market on the fringes of Mumbai city laments the recent rapid increase in the prices of everyday essentials such as cooking oil, sugar, and now onions, a basic food component in most Indian dishes.
After the cost of Petrol and Diesel, edible oils, and other daily essential commodities reached all-time highs, Indian consumers today are likely to be further squeezed by a rally in Onion prices after heavy rains in the country’s key growing states damaged the summer-sown crop and delayed winter crop sowing.
Political responsive commodity
Onion is also a politically sensitive commodity, with price rises contributing to the downfall of more than one state government in the past.
‘The cost of each essential commodity has risen. Prices for edible oil and sugar had previously increased, and now onions and tomatoes have more than doubled in a fortnight. How does one manage a monthly budget when income is stagnant?’ Patil stated.
‘Excessively rainfall in September resulted in disease attack and stunted growth of Onion bulbs,’ said Samadhan Bagul, a farmer from Dhule district, nearly 325 kilometers north of Mumbai, who expects to harvest only one tonne of Onions from an acre of land, rather than his usual five tonnes.
According to the weather service, key onion-producing states such as Maharashtra, Madhya Pradesh, Gujarat, and Karnataka received up to 268% more rainfall than normal in September.
Because of the crop damage, the wholesale prices (WP) at India’s largest Onion trading hub, Lasalgaon in Maharashtra, more than doubled in a month to ₹33,400 ($444.82) per tonne. Retail prices in major cities such as Mumbai have risen above ₹50 per kilogram.
Onion prices are expected to remain firm during the current Dewali festival season before beginning to moderate in mid-January as supplies from the new season crop increase, according to a Mumbai-based dealer.
The effect on exports
India is also the world’s largest Onion exporter, and the price increase may prompt New Delhi to limit shipments, potentially raising prices elsewhere, particularly in Bangladesh, Nepal, Malaysia, and Sri Lanka, traders said.
According to the president of the Mumbai-based Onion Exporters’ Association, Mr. Ajit Shah, ‘higher Indian prices have prompted importing countries to shift to other suppliers such as Turkey and Egypt.’
India banned onion exports for a few months in 2019 and 2020 to cool domestic prices, causing a shortage in neighboring countries such as Bangladesh and Sri Lanka.
This year, the government has also attempted to lower food prices by enacting measures such as lowering the duty on edible oils.
‘If the government believes onion prices have risen too much and too quickly,’ said a Mumbai-based onion exporter, ‘India could ban exports as it has in the past.’