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    Onion prices are likely to remain high until next year. Here's why

    Onion prices are likely to remain high until next year. Here's why

    Onion prices are likely to remain high until next year. Here's why
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    By CNBC-TV18  IST (Updated)

    Mini

    Going by the tear-inducing onion prices in the country currently, you wouldn’t have guessed that the production of the kitchen essential this year in India has been the highest ever. But despite the government’s efforts to keep prices under control, consumers are still struggling to find the bulb for anything less than a three-figure sum for a kilogram. Worryingly, there is no respite in sight before the new year.

    Going by the tear-inducing onion prices in the country currently, you wouldn’t have guessed that the production of the kitchen essential this year in India has been the highest ever. But despite the government’s efforts to keep prices under control, consumers are still struggling to find the bulb for anything less than a three-figure sum for a kilogram. Worryingly, there is no respite in sight before the new year.
    According to a CARE Ratings report on onions, the prices are unlikely to fall before the beginning of the next harvest season for the crop in January-March.
    India has produced 23,485,000 tonnes of onion this year which is marginally higher than 23,262,000 tonnes the country produced last year. The production trend has been continuously on the up since 2014-15 before which there were years of fluctuating production, said the report.
    There are three main onion harvest seasons—October-December (15 percent of the total produce), January-March (20 percent), and March-May (65 percent). Due to sheer volume of produce in the March-May rabi season, it becomes the most important for onions. Any crop failure in the October-December season is then addressed in the January-March kharif season.
    Onion production
    Reason for rising prices
    CARE Ratings lists three reasons for rising onion prices.
    Harvest in Maharashtra, which is the top onion producing state in the country, accounting for over 35 percent of the crop, was delayed by prolonged monsoon.
    Crop damage in Madhya Pradesh (58 percent damage), Karnataka (18 percent), and Andhra Pradesh (2 percent). Maharashtra, Madhya Pradesh, Karnataka, Bihar, and Rajasthan produce three-fourths of the total output.
    The area sown in major states was 7 percent lower—which could be due to the lower prices received in the last season.
    Onion producers
     
    Government’s efforts
    In an attempt to bring down the prices, the government reduced the stock holding limit for onion to 2 tonnes from 5 tonnes for retail traders. Last week, the government had reduced the stock holding limit for retailers to 5 tonnes from 10 tonnes while that on wholesalers to 25 tonnes from 50 tonnes.
    The has government also imported onions from Afghanistan and Egypt to cool down prices, which have helped in stabilizing the prices to some extent.
    What next?
    While imports help, CARE Ratings warn that often importing can be a time-taking process. “…as often by the time the imports come in the late kharif crop would have fructified leading to further crash in prices,” it added.
    “Under the present circumstances an option is to wait for the next crop in January which will ease prices as there are no signs of sub-optimal output in the late kharif crop as yet,” the report concluded.
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