Rise In Onion Prices: Should Retail Consumers Worry?

After a surge in tomato prices, the central government finds itself grappling with skyrocketing onion prices. Consumer Price Index (CPI) based retail inflation reached a 15-month high, driven by rising food prices. Meanwhile, tomato prices eased to Rs 50-Rs70 a kilogram, the government said on August 21, after an astonishing 700 per cent increase. Due to the rise in onion prices, consumers were worried because, unlike tomatoes, there’s no easy substitute for onions.

The Current Situation

Amid concerns about reduced Kharif output due to heavy monsoon rains in some parts of the country, onion prices rallied in August. On August 19, 2023, the government announced to raise the export duty on onions by 40 per cent to ensure their availability in the domestic market.

However, this move led to another consequence. Onion traders protested against the steep export duty, fearing it might impede exports and cause their stock to pile back up at ports. On August 22, 2023, PTI reported that traders’ protests led to Agriculture Produce Market Committees (APMCs) in Maharashtra’s Nashik district, including those at Asia’s largest wholesale onion market, the Lasalgaon APMC, suspending onion auctions for a second consecutive day, which can push the prices further up.  

Should Consumers Worry?

Besides imposing the export duty, the government has taken other measures to address the onion price rise. The centre decided to increase the size of the buffer stock of onion to 5 lakh tonnes for 2023-24 from the earlier 3 lakh tonnes, which has already been procured. Consumer Affairs Minister Piyush Goyal urged farmers on Tuesday, August 22, 2023, not to wocenter the centre has restarted procurement at Rs 2,410 per quintal to increase the size of the buffer stock.

Further, to cushion the impact of rising onion prices on consumers, the minister announced that the government is releasing buffer onions into the retail markets of Delhi-NCR. These onions are being sold at a subsidised rate of Rs 25 per kg, starting from August 22, 2023, Goyal said. Also, the Kharif onion sowing is underway, and if the total coverage remains the same at last year's level, the production is expected to be better, he added.

Finally, due to the imposition of export duty, buffer stock expansion, and sowing of Kharif onion, customers can hope that onion prices will stay under control.