Long-term market strategies must to ease

prices
According to us, the government should first build buffer stocks, depending on onion
production and storage capacity. For long shelf-life, the onion should be hydrogenated.
During the lean season, it can be sold at a lower price. This has been found effective in the
case of commodities like sugar, as the presence of buffer stocks discourage traders from
hoarding. Second, the government must import onion and sell it at a subsidised rate. This will
bring down onion prices substantially in the open market and the hoarders will have no
option but to sell it at the market rate.
The wholesale price of onion had been in the range of Rs 2 to Rs 4 a kg for 25 years between
1971 and 1996. After that, the price started marginally moving up. In the last few years, the
market price has reached up to Rs 100 a kg. Despite such high prices, farmers were forced to
sell their produce at rock-bottom prices during the peak harvesting season, making cultivation
non profitable. Currently, hydrogenated onion is being sold at Rs 15 a kg in certain markets
as against the prevailing market price of Rs 100 a kg. Meanwhile, wholesale onion price in
Delhi touched Rs 51.75 a kg on Thursday a rise of Rs 1 a kg from the previous day.
Onion prices have risen fourfold in six months. Data compiled by the Ministry of Consumer
Affairs showed the retail onion price at Rs 60 a kg on Thursday in Chennai, Rs 66 a kg in
Mumbai and Rs 60 a kg in Kolkata.
The government has asked National Agricultural Cooperative Marketing Federation of India
Ltd to import onions from Pakistan and other countries. Of late, the focus of the government
has been to raise cereal output to meet the food security Bill requirement. Experts said it
should also focus on improving the production of fruits and vegetables.
Market Structure of Onion
Market structure of Onion in India is summarized below.
Small holding of farmers: Land holding of onion growers is very low. Most of the farmers
own less land and due to unfavourable weather conditions and need to spread price risk over
a period after harvest even one big vehicle is not available with a single farmer field at a
given time. Such small availability implies that the individual farmers have a little say in the
final price of the onion in the market.
Marketing produce as per grade necessity: Different regions and markets of India have
different requirements of Onion (while eastern India / Bangladesh etc. markets prefer small
sized onion, North and West Indian markets prefer bigger sized onion). Traders buy small
lots from the market yards and pool the produce for sorting / grading at their pack houses and
sends different grades to different markets all over India depending upon the grade
requirements and price at a particular market. Lack of trading expertise, market knowledge
and risk bearing capacity has prevented most of the farmers to make a significant dent in
onion trading. So, most of the trading is in private hands.

Local markets act as a reference market to small growers: Farmers generally take
reference of the local markets rates, while traders compare rates of all markets, including
major distant and export market and then decide where to send their produce of a particular
grade. This brings greater profits to them.
Concentration of large storage capacities with traders: For historical and financial
reasons, large storage capacities for onion have remained with private traders and that too in
Nasik belt. Traders can buy the whole stored lots and provide sorted / graded produce to
retailers or buyers as per their requirement at their risk and cost.
Existence of established traders and barrier to new entry: In important onion markets, the
commission agents and the traders dealing with onion are well established and have an
average experience of 20 years. This shows the lack of new entries in the market as well as
domination of the established market players.
Production
2004-05
Area
Production
Yield

05-06

06-07

07-08

08-09

09-2010

2010-11

549.10

661.90

702.10

704.35

834.20

755.70

772.80

6434.60

8682.60

8885.14

13900.40

13564.50

12212.80

12970.10

11.72

13.12

12.66

19.74

16.26

16.16

16.78