Many layers: On onion produce, issues

Since the 1960s, India has developed a balancing-act habit: between keeping food prices affordably low for consumers and assuring farmers of remunerative prices, with the state’s interventions focused on managing this volatility in the short term. This is also why the government banned onion exports from December 2023 to May 2024, then imposed a $550/tonne minimum export price and a 40% export duty, reduced the duty to 20% in September 2024, and finally abolished it in April 2025. But erratic weather together with the lack of long-term relief has rendered the act increasingly awkward. From farmers’ point of view, the government often changes its mind after they have made important production-related decisions based on the expected price. On the other hand, during the bounteous rabi harvest, onion farmers in Maharashtra, the country’s principal supplier, had argued that the Centre’s procurement price of ₹12.35/kg would not cover the costs of cultivation. The Centre subsequently raised the price to up to ₹26.45/kg, but many farmers — including some who had had to sell at ₹1/kg earlier because of low quality and lack of storage, among other factors — were unable to capture the higher value, exposing the limits of intervening after prices have already collapsed and not reaching all farmers or grades of produce.

While the government has alluded to some price manipulation, the dominant issue remains that it keeps reacting instead of taking proactive measures, including improving storage options, maintaining a less erratic trade policy, moving stock more efficiently between regions, and protecting farmers against price shocks. The abnormal rainfall at the time of harvest and a 5%-7% drop in the kharif crop in Maharashtra, together with the well-known challenges associated with storing onions and maintaining large buffers, are simply among the pressures that highlighted the flaw this year. Further, Tamil Nadu’s targeted subsidy, to buy 1,000 tonnes of onions to distribute 1 kg per ration card at ₹35, will impose pressures on the Centre to maintain a steady supply. The move is commendably designed to discourage hoarding while allowing private retail prices to cool down. However, the State must also guard against the pitfalls of distributing onions through a dry-grain PDS network — its economic case could collapse if post-harvest losses, to which onion is more susceptible than, say, wheat or rice, exceed 10%-15% — and if the need arises to persist with the subsidy. Finally, if other States also adopt similar measures, the Central buffer could be quickly exhausted, more so given this year’s high storage losses of around 30%.