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What's the article about?
- It analyses the pros and cons of the steps taken by the Union Government to curb the rising prices of the onions.
Relevance:
- GS3: Issues related to Direct and Indirect Farm Subsidies and Minimum Support Prices; Issues of Buffer Stocks and Food Security;
- Prelims
Context:
- The retail inflation in India, measured by the Consumer Price Index (CPI), has been increasing due to high food inflation, particularly in the prices of tomatoes and onions.
- To address the rise in onion prices, the Union Government has imposed a 40% export levy on onion exports until December 31, 2023.
- This move is aimed at controlling the domestic price of onions by making Indian onions more expensive than those from other countries like Pakistan, China, and Egypt.
- The export duty is expected to lower the exports of onions and improve the supplies in the domestic market.
Analysis:
- Reasons for rising onion prices:
- Maharashtra and Madhya Pradesh account for almost 60% of India's onion supplies, and deficient rainfall in these states has put a question mark on the moisture-sensitive tuber's prospects this kharif season.
- These worries likely triggered the recent uptick in onion prices from around ₹23 a kilo two months ago to over ₹31 by August 2023.
- Impact of export levy:
- Onion traders and farmers were not impressed with the export levy, and markets were shut in protest in Nashik, Asia's largest onion trading hub, as farmers feared a glut and a price crash.
- To quell onion farmers' displeasure, the government promised to purchase onions at a “historical high” price of ₹2,410 per quintal, and buffer stock procurements will be ramped up further if needed.
- However, a Bank of Baroda report cautioned that steps such as export curbs also have a tendency to reinforce the scarcity factor worrying markets and push up prices further.
- Other measures:
- This move follows curbs on non-basmati rice shipments outside India in July, and stock limits on pulses and wheat imposed in June.
- The government also announced a hike in buffer stocks of onions by two lakh metric tonnes.
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Operation Greens:
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Way Forward:
- Building durable food supply chains, especially for vegetables that are traditionally susceptible to price volatility, needs greater attention so that monetary policy can focus on growth concerns.
