How the world's second largest onion producing nation resorted to imports

This, after India exported 1.36 lakh tons of onions worth ₹423 crore till September

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Ashish Kulshrestha | The Clear Picture

It's missing from salad plates; It's no where seen on the top of one's ration list.

The humble onion, a key constituent of India's staple food items, is missing from the plate courtesy unseasonal rains coupled with floods in key onion producing states such as Maharashtra, Madhya Pradesh and Karnataka.

These three states that collectively produce over 66% of India's total onion production today suffer a dearth of this essential commodity to the tune of 58% in Madhya Pradesh and 12% in Karnataka while the crop in Maharashtra is delayed due to continuous rains, said Ministry of Agriculture's October month report on onion.

These factors forced the world's largest onion producer to import 1.2 lakh tons of onions, as approved by the Union cabinet. While it constitutes roughly .05% of this year's prediction of 235 lakh tons production of onions, the very fact that India had to resort to imports to keep the domestic prices in check is worrisome. This comes after India continued to export onions to the tune of 1.36 lakh tons worth ₹423 crore till September, reflecting on the ill preparedness of crop planning commissions.

Now let's take a look at the factors driving onion prices up North

1. Continued exports ahead of crop shortage

India has been making steady progress in the production of onion since fiscal year 2015-16 when it produced 20,0931 metric tons preceded by 22,427 MT in 2016-17 and 23,262 in 2017-18. While India is expected to produce 235 lakh tons of onion in the fiscal year 2018-19, it imported 0.5% or 1.36 lakh tons of the total expected produce till two months ago and is now resorting to import of just 0.5% or 1.2 lakh tons, pointing fingers towards the ill-preparedness of the administration.

2. No country for food warehouses

According to global property consultant Knight Frank, total warehousing space is estimated to be 739 million sft in 2019 for the manufacturing sector which is projected to grow at a compounded annual growth rate (CAGR) of 5% in the next five years to 922 million sft by 2024. The industry is investing heavily in warehouses, though food items tend to give it a miss. The only ray of light is the entry of organised offline and online players into the Indian agriculture market which might lay the foundation for food safety in the country.

While the Food Corporation of India only procures wheat and rice, entry of players such as Flipkart, Amazon, Grofers and Big Basket will help in avoiding such drastic price hikes, if take at scale. By setting up dedicated warehouses in key onion producing regions with an efficient supply chain to check pilferage, these organisations are setting up industry best practices for managing the largest industry in the world- agriculture

3. Stopping farmers from producing more

As per a report in The Economic Times, India is staring at a bumper onion harvest next year as farmers are upbeat about the high prices onion is fetching for them. They expect this to continue next year as well and are hence, planning wide coverage of onion plantation.

However, this will lead to a glut in the market, creating a drastic fall in prices and upsetting farmers' hopes. Hence, there is a need for the government to intervene in controlling the production and making necessary arrangements for storage of excess produce. If India can control key and non-key sectors such as petroleum, pharma, staple food items, fertilizers, petrochemicals and airlines, why can't agriculture and horticulture items' produce be controlled for the benefit of both consumers and producers.