January 14, 2011

UNDERSTANDING AND SOLVING THE GREAT INDIAN ONION PRICE CRISIS!

There seem to be two commodities that are all set to face each other in a combat mode. If on the one hand, bidding at IPL-4 is breaking and making newer records by offering otherwise affordable players, almost unaffordable bids and making them out of the reach of smaller teams, then on the other hand, an affordable and staple vegetable – the onion – is all set to make newer records with its price rise, again making it unaffordable to almost every consumer!

The prices of onions have been exponentially shooting up since December 2010, mercilessly burning the pockets of consumers at large! As per figures released by Ministry of Commerce and Industry, the wholesale price index (WPI) for food climbed up by more than 12 per cent in the first week of December 2010. Comparatively, onion prices have shot up by anywhere between 80 to 150 percent during the same period across the country.

What has been intriguing is the manner in which the government has dealt with the entire crisis! It is not that the government is not aware that the onion is an integral component of its citizens’ food baskets, and more so for the ones below the poverty line who barely survive – still, the government maintained its lackadaisical attitude towards the crisis. It is also not that the government was unaware of the fact that climatic challenges had created havoc for the crop in Maharashtra – still, the government chose not to take preventive action. It is also not that the government was unaware of the fact that hoarders in our country await such opportunities and make a killing by further creating supply bottlenecks – still, it chose not to intervene adequately. It is also a fact that the government knows that onions have a legacy of bringing down governments – but it still chose to remain silent! So much so that in the month of November, when onions were taking more time than normal to reach the market from Nashik (due to untimely rain), the government and authorities didn’t put into place any measures to check the expected price rise. And what followed in December was bloodbath as onion shipments were reduced by almost 270 per cent, thus escalating the price by 150 per cent in a period of seven days. What is most paradoxical is that instead of tracking and acting upon real time information, the Minister for Agriculture was busy issuing export licenses, which had to be revoked immediately after the crisis! And mind you, such illogical issuing – and then cancelling – of export licenses is not new. The same was done for sugar and wheat sometime back.

It is not just about onions – the distortion in the prices of essential food commodities has been at a crisis point for a long time now. There have been numerous reports which document the kind of exponential gaps (at times, to the tune of 400 percent) that exist between the wholesale and the retail prices of essential food commodities – but no concrete action has been taken by the government. As a kneejerk reaction this time, what the ministry of agriculture did to contain the price rise of onions was to ban exports on one hand and to permit imports on the other. It did give a temporary relief, but clearly was a hasty and illogical call – as per reports, the onions that were exported to countries like Pakistan for Rs. 20 per kilo, had to be imported back at Rs. 45 per kilo! Not to forget that Pakistan too eventually had to put a ban on exporting to India.

The truth is that onions would keep burning the national pocket till the time structural changes are not made in the agriculture sector – and this is no secret, given the yawning gap that exists between production, storage and distribution! In the given environment, taking advantage of these gaps, those are the retailers who make merry perpetually, and the hoarders who wait for their pound of flesh in times of crisis! And the consumers, particularly the poor, are made to bleed at all times. Although people might debate that the production of food grains is subject to the vagaries of nature – and that nothing much can be done about it – the fact is that even after 63 years of Independence, our irrigation infrastructure is shameful! The truth is that by now, we should have created such an irrigation infrastructure, that our dependence on nature should have been negligible! But then, the same has been a monumental failure! And similar is the state of distribution and storage infrastructure! It needs no Einstein to realize this, that taking advantage of these bottlenecks, those are the middlemen who have been exploiting these inadequacies to the fullest! And the irony in the entire episode is that while prices of crops like onions are going up by 150 percent, it is the farmer and the consumer who is losing it all. And shamefully, the government allows this to happen not once, not twice, but repeatedly!

All in all, there are no shortcuts to solving such crises. In the first place, the government had adequate forewarning that the crisis was coming, as is the case with any food crisis – since rains, farming patterns etc clearly give an early warning about food production trends. And when the crisis is around something as essential like the onion, and given the fact that the structural changes from irrigation to distribution can't be brought about overnight, the government should have planned imports on time. With 300 billion dollars of foreign exchange reserves lying with the government and with no creative use in their mind, the least that the government could have done was to plan on spending a meager 500 million dollars on giving its countrymen onions. And in case even imports were not available, then advance warning systems should have been put in place informing civilians about the impending onion crisis and advising them on planning their food intake accordingly.

But all this only after seeing to it that at least all the available stock is reaching the consumers. This time around, that itself didn't happen. The hoarders made merry; and the government – being hand in glove with them – did nothing. Many years back, Nehru had said that every hoarder and black marketer should be hanged from the nearest lamppost. That's exactly what the government needed to do. In the last twenty years or so, there has been no proper action against hoarders. Laws have to made and implemented where hoarders fear instant jail upon being caught hoarding essential food commodities. For hoarding, you don't need to have a court case that lasts fifteen years. When you hoard, it’s visible. One simply cannot hide tonnes of onions below one’s bed! There should be fear of punishment.

And with these four things in place – a totally reformed irrigation system to avoid dependence on nature, a direct access to farmers to take their produce to consumers (instead of going through layers of middlemen), a strong punishment system for all hoarders, and finally, a preplanned import structure just in case there still remains an impending crisis – we will perhaps never see another onion crisis or similar situation again.

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23 comments:

Umesh Bawa said...

Pretty glad to read someone whinning on the tracks of political jeopardy....
But Mr. Chaudhari, could you plz. Explain us, in brief, that is there any way- where ruling govt. Can cope up with rising natural disasters & calamities on agriculture sector, with balanced cost of production to be pocketed by poor farmers at irrigation time- by abiding with policies to tackle rising prices of essential food commodities?

Jai Ho said...

The answer is there within the topic. There are some long term, grass root solutions suggested by Mr.Chaudhari which take a bit of time to implement but must be done to avoid whats currently happening. We are all pretty aware what happens to all the welfare schemes - what finally reaches the beneficiary is insignificant percent of what is planned. If current policies have limitations in tackling with problems, lets revamp and set new norms, whats stopping it? The vote bank or loot bank?

uttamkumar said...

Hi,
I am currently staying in Navi Mumbai... As per my knowledge this price rises are because of lack of attention from Govt. for commodity price hikes or may be somebody want to make more politics by using this... This is known to every one that normally someone from our great persons make a decision to export our daily useful commodities and import them in higher rates... because of own profits.. Now you can read this story from mumbai.. it will give real idea.. http://younews.in/story.php?title=buy-onions-for-rs-12kg-direct-from-farmers-1

If govt. persons are not eligible to handle this crisis. That means they don't have a right to sit on that position. We can take examples from other countries. If they can overcome everything.. Why we not.. The difference is they work properly as we work for our companies for salary and status and give our best to our jobs.... But Govt. don't care for his performance They are not answerable to anyone... So we are here and facing all the crisis...

Ranvir Singh said...

I am a farmer and I agree with what Mr. Arindam Choudhary has written. It is true that climatic conditions play a major role in agro sector production but the fact remains that the poor farmer always suffers. he suffers when the nature is harsh with him and he suffers when the nature smiles at him bestows upon him a bumper crop but then he finds no takers. he is forced to dispose off his produce at throw away price because he does not have holding capacity. once the produce is out of his grain yard the price for the same commodity start shooting up because license after license for export are issued to the favorites of people like our Honorably Agriculture Minister and in no time the shortage for the same commodity is created in the domestic market. At this stage import licenses are given to the same favorites to get back the same commodity at a much higher price. This game has been going on for the last so many year especially when a Congress led govt. is at the center. The link posted by Mr.Uttam Kumar is throws enough light on the onion scam Sure enough the readers may not have forgotten the sugar price hike when sugar was exported at throw away price and imported back at three times the export price from the same country. Sugar was selling at Rs,40/- per kg. but a poor farmer in UP was being forced to part with his sugar cane at a price of Rs.190 per quintal. the answer to all these lies in the measures suggested by Mr. Arindam Choudhary in addition a clear cut policy on assured procurement of all farm produce at a reasonable price from farmer. A policy banning export of farm produce which may effect the domestic demand is the need of the day. Most severe punishment without trial to hoarders and action against those politicians and bureaucrats who issue such licenses for their monetary gains at the cost of interest of the nation. long term measures for the development of irrigation and storage facilities will help avoid such occurrences in future

sreedhar said...

Excellent article. I agree with Jai Ho, If there are not enough policies and rules in government to control these kind of situations, it is high time we need to revamp our policies and constituion in par with the current scenario. Whats stopping them in delete/modify/addition to the existing obsolete policies and make new ones which will help the common man(aam admi).Time to respond!

purnima said...

pRICE HIKE IS MAKING BIG HOLES IN THE POCKETS OF EVERYONE, BUT FOR EACH AND EVERYTHING WE CAN NOT BLAME GOVT.. People have become too self centered and greedy that they have ceased to care about their fellow human beings.

Sudharshan said...

Hi, this whole issue of price increase of onion and other essential commodities are indicator of minister's irresponsibility. For sure, one can not predict or prevent disasters & calamities but one can pretty well plan to avert consequences. Eg, we may not be in a position to increase onion production but certainly one can plan export ban and plan import etc when spoiled crop is in store. Ministry would know well in advance about the affected crop and its job is take effective measures.

For this chaos, we cant squarely blame the entire government, its only to facilitate better governance, ministries are formed. When the ministry doesn't act as it is supposed to be, the onus is on the minister in this case Mr.Sharad Pawar. He must feel ashamed for his irresponsibility and resign from his post.

Sorry state of affair is, when there is hint that "price rise can not be controlled in coalition compulsions", his party spokesman is attacking back with rude comments.

VINODturan said...

its a good explainer of our slacky system ,yes ofcourse after more than 60 years of independence we should have adopted to better storage facilities but there is no way of irrigation beyond nature or rain. but our sleepy govn could do a better job if they might have taken timely action

rajuda said...

Too long. All the passion is lost in the words!

Bank on 'nano narration' - Crisp, Concise and Power packed. Makes it easy to read and understand.

Vikram said...

Looking at Sharad Pawar's political track record, he is most qualified to be the Agriculture minister.

Even the politicians are hoarders, in a way who allow this to happen again and again.

We have so many new parties coming in India with new election promises. You cannot address and track these national problems.
shamefully, the government allows this to happen not once, not twice, but repeatedly!

All in all, there are no shortcuts to solving such crises. In the first place, the government had adequate forewarning that the crisis was coming, as is the case with any food crisis – since rains, farming patterns etc clearly give an early warning about food production trends.

And when the crisis is around something as essential like the onion, and given the fact that the structural changes from irrigation to distribution can't be brought about overnight, the government should have planned imports on time.

With 300 billion dollars of foreign exchange reserves lying with the government and with no creative use in their mind, the least that the government could have done was to plan on spending a meager 500 million dollars on giving its countrymen onions.

The onion crisis divides the rich government and poor people and shows no bright future for divided India

sirajuddin said...

the very sad thing is that the farmer is not at all benefiting from this.So its better have some system in place where the difference between the price we pay and the price which farmer gets should be minimal

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subbuyerramalle said...

i fully agree with the author that its a shame to our leaders that till date we couldn't make our food production less pron to nature's wageries

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soumya said...

Timely article but the solutions are as funny as the system/govt you tried to make fun at . . Apologies if it hurts the sentiments, but in desperate times one should be less apologetic and more practical and straight forward.

The problem lies in the concept of consumerism. The system is so feudal. It’s not our fault that we live in the same world where the concept of consumerism is established irreversibly. Whether this has eroded our moral values where few produce and all others consume is a subject of discussion. Obama did try to behave good-o-god with us by paying more than a lip service to Gandhian values and what a great admirer he has been of the great soul. He would never even comprehend what lies ahead in the tunnel for his country if the same values are eroded beyond repair and consumerism no doubt has taken over everything that the biological existence of man seeks.

We pay the highest prices for everything that we as individuals or masses don’t produce or can’t produce or are unwilling to produce or even on a more serious note don’t have the means/desire to produce. And when the items that we can’t produce get inter linked and inter-twined either by virtue of delivery, transportation or by simply being by-products of one another everything costs a bomb. And who is picked as the sufferers, the disillusioned upwardly moving urban man with no tangible productivity, or the over hyped middle class who can afford expensive night outs, trendy schools for their children, spend thousands on tasks outsourced to maids, drivers, laundrymen, cleaners which they themselves could have managed on their own. The hungry remain hungry and don’t pick at menu’s neither he looks at the GDP or inflation rate, never heard off what CWG was or what the hell is 2G. Any one worries for them ??

Analyzing data for the poorest of poor, the hungry, the millions of under fed hungry children and their mothers is a more urgent task than anything else. Because they the only ones who are impacted the most irrespective of the fuel price, irrespective of my salary hike, or how much the hoarders or the politico made on scams or collaborating with exporters or lobbies or even what your institute charges per semester teaching philosophy of management.

How to feed the hungry and whose job is that? As a billion people country with less than a million tangible food (or be anything) producers the disaster is looming large. Economists beware,if you don’t see micro, forget about the bigger picture. You have no picture at all.

narayan said...

The indian law is strong on the weak and weak on the strong. The instance of the law following its natural course is rarely established. We are studying the case of price rise of onions and remedies to be pursued, which could have been managed if genuine administrative policies are made and followed

A.K. VENKATACHALAM said...

Your concepts on food price inflation are misplaced. What can you comment on the inflation of food prices in 2008 May, wheat inflation in 2009 and petrol inflation in 2011. It is the egalitarianism followed by the UPA governement which follows from the lack of Rational ethics in the Indian society. Merely by screaming out aloud from your blogs and on mainstream media, you are only propagating incorrect ideas may be to boost your book sales. To get an idea of the real cause of inflation, I suggest you listen to Ayn Rand's lecture on the same topic on the web or read it in her book, " Philosophy, who needs it"

Kapil said...

All good thoughts, but how to go about making this happen? With our corrupt ministers with no accountability these will remain just words. Isn't there some answering that the agriculture minister and the govt needs to do?

BTW, as an economist can you please explain how something can reduce by 270%??

Technology Journal said...

Sir,

National Agricultural Planning is required to solve the Crisis.

Govt. should give incentive to farmers to farm that staple with 20% to 40% cushion for export of the same to earn foriegn exchange.

Also good international relations will help at such times to get onions.

RV

Hardayal said...

This is the Age of Psycho-Technology
As present human understanding is entering into the area of Circular Dimensional Understanding, some South Asian Genes have just been learning how to perceive the data installed in the Cosmic Mind and they are near to develop the Psycho-Technology and the Word-Archeology. India is unknowingly entering into the area of Superpower with its Life-Sciences or the Ultimate Science () of all the departments of Science. India will be able to show its clear height in the Global Technological Market between 2024-40. So, there will be Radical Change in Indian including South Asian Politics. Some political leaders having extra-ordinary leading capability will appear in Indian politics after 2017. Though Indian Army, Scientists and People are able enough to face any attack, India has to face big problem if the present corrupted political environment persists. A strong political phenomenon is necessary to face every attack successfully. South Asian Nations including India have also been suffering because of the wrong American Global Policies. Of course, innocent Americans will be forced to pay its cost too. If India is unable to give a new path and direction to the world in time, nuclear war will begin. Ultimately the USA and China will be face to face. So, the USA has to change its policies. Of course, the humanity on this Earth will be safe if India is able to guide the Future Global World. If all the Material Sciences of the West is unified with the Indian Ultimate Science, Global War can be converted into Global Peace. Every war is the unnatural force created because of our ignorance about the Cosmic Constitution. The opposite activities being performed globally against the Cosmic Constitution are the reasons of all the natural and social problems. As my Current Conscious Mind is reading the West Society, it is simultaneously declining very fast and going to be collapsed in near future, if its direction is not changed as per the Ultimate Indian Science. Probably, before 2040-42, the West will be in great loss if it doesn’t adopt the Ultimate Indian Science soon.

The Dialectical Jupiterism is the only option to cure the Incurable Socio-Political Cancer. Probably, we are going to launch the Dialectical Jupiterism globally very soon.
Hardayal Kushwaha
9911197344,9990807740

vasdev said...

We always differentiate from hoarders,middlemen from govt .Is it correct?Their representatives act according to their need .people feel much as they believe them as their representatives.It is the tragedy

Jayant said...

See this paradoxical situation wherein in plenty the producer perishes and in 'shortage (created by inefficient organisation of food supply chain), the consumer ies (but does not die)!

What is needed for some 'farmer-consumer groups (such RWAs)' to 'rise to occasion' and follow what is now being offered as a 'mechanism for secure and safe food in the NCR' by FICATS and NAZAFGARH SCHOOL OF BUSINESS:

a comprehensive solution for some identified commondities (identification of monthly consumption volume shall be matched by monthly 'maximum prices' to be 'fixed for months in advance' by 'Consortium of B-to-B organisations (they may be farmers-RWA Company)'.

What this arrangement means is that this Consortium has to workout arrangements with 'System Integrators' in cluster of 9-villages (9-Gram, 9-Ratna Cluster Development Yojana), who would 'implement their monthly supply' through their 'production-storage-consumption' solutions. HABITAT-Prof Sher Singh Institute of Agri-Food-Consumption-Health Studies has come up in Beri Block of Jhajjar district to help create efficiency at the producers level but production without efficient storage and efficient availability to consumers, would 'add huge costs' and these costs could create conditions for 'shortage', which through 'exports and illegal storage', (I prefer to say this word instead of poorly defined 'hoarding' where we are asking for the hoarders to be hanged though they are suppliers of maximum money to local politicians and therefore, shielded at the top) as tools available in the hands of 'local-national politicians' provide uncotrollable 'windows of opportunity of profiteering'.

This is all stoppable with a novel Indian system of organisation of retail, not multi-brand one which has been allowed just one day prior to 'Gandhi Ji's Martyrdom day' (29 January, 2011), openning doors to 'Walmart' & 'TESCO'. On similar lines, FDI in higher education shall creep in. While these currents were predictable since 1995 when 'agriculture and IPR', became part of WTO system through Agreement on Agricultrue and TRIPS, the 'Indian solutions' were the responsibility on top of every body of Indian academia and then, Indian industry and inwe must forgive our Governments as they had been very 'topsy-turvy' in this time of 'political-flux' and are yet to grapple with what is 'right or wrong' in the 'post-WTO world', which has produced many busts in different economies after 1995 (which I could take liberty now to say is 'country-specific correction'- as similar concept to 'homeostasis' of biological systems). Gandhi always espoused the great pay tribute to your local ecological strengths and weaknesses and design the politico-economy on that basis and in this manner, 'Independent Republics of Indian Village', were conceptualised by Gandhi Ji as 'smallest units of Ram Rajya'

It is something which we should understand again that what Gandhi told us even in his last words was the message to look towards 'Ram Rajya'- not to be viewed as parting shots of a dying man but words of wisdom to his family by a Father'. As 'Bapu', he told us to remember 'Ram's Rajya' as our 'innovation which has to be invoked from our civilisation'

Indian spiritual basis of 'Small is Beautiful'and this means it is essential always to paid actual tribute to u this to -company also) being now tried to who is pro in the morning

Chelsey said...

If on the one hand, bidding at IPL-4 is breaking and making newer records by offering otherwise affordable players, almost unaffordable bids and making them out of the reach of smaller teams, then on the other hand, an affordable and staple vegetable – the onion – is all set to make newer records with its price rise, again making it unaffordable to almost every consumer!
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