Export ban not a solution

AuthorPublished: 1st Oct 2019  12:10 amUpdated: 30th Sep 2019  10:09 pm

Onion, the humble cooking ingredient of Indian kitchens, has a way of dictating the electoral narrative as well. The political footprint of onions was first established in the 1980 elections when Indira Gandhi used the issue of onion prices as an effective campaign tool on her comeback trail. Then, in 1998, a sharp increase in onion prices proved costly for the BJP government which lost the election in Delhi. No wonder that the soaring price of this bulbous vegetable sends the ruling parties in a panic mode. The central government’s decision to ban export of onions, on the eve of Assembly elections in the BJP-ruled Maharashtra and Haryana, is clearly a panic reaction. Though the move is packaged as a policy intervention to check the price which has touched Rs 80 per kg in some cities, it is an ad-hoc measure that doesn’t help solve the problems being faced by the farmers. What is needed is a holistic approach to insulate farmers from the vicissitudes of the market and the vagaries of Nature. There should be greater focus on investments in modern cold storage units and processing facilities that will help augment supplies during a crisis. In the past too, successive governments resorted to banning exports whenever prices surged. This is a flawed policy option. It must be pointed out that the domestic price of onions is a reflection of the efficiency of the supply chain, apart from taxation, commission agents’ fees and export orders. Encouraging imports, not banning exports, is the remedy to augment supplies.

Along with the export ban, the Centre has imposed countrywide stock limits on onion traders to facilitate release of stocks in the market and prevent hoarding. For retail traders, the stock limit is 100 quintals and for wholesale traders, it is 500 quintals. One wonders why the government did not show similar alacrity when onion prices crashed to Rs 1-2 per kg in the past, forcing farmers to discard their produce. The present spurt in onion prices is largely due to supply disruptions following floods in some states. This is not the first time that onion prices have skyrocketed. In 2010, excessive rainfall in Maharashtra delayed the arrival of onions, prompting the then UPA government to ban exports. A similar surge in prices happened in 2013 and 2015 as well. Usually, onion prices go up during the lean period from July to October when the market is dependent on the stored produce. India is the second-largest producer of onions after China and also a major exporter. For the first time, the Centre has now simultaneously imposed stock limits nationwide, though the task of fixing the stock limit falls within the ambit of the state governments.

 


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