In response to fluctuating onion prices, the Union government has initiated procurement from farmers to establish an emergency buffer stock of 500,000 tonnes for the fiscal year 2024-25. This proactive measure aims to bolster supplies and mitigate potential price spikes in the market.
Buffer Stock to Address Market Volatility
The creation of a buffer stock equips the government with the means to intervene in the market during price escalations. This strategy becomes especially crucial following the recent lifting of the five-month ban on onion exports. To deter excessive exports and stabilize domestic prices, the government has imposed a floor price of $550 per tonne along with a 40% tariff on outbound shipments.
Assurances of Onion Price Stability
Nidhi Khare, Secretary of Consumer Affairs, expressed confidence in maintaining stable onion prices despite the resumption of free exports. Khare cited adequate availability, consistent pricing, and robust output from the winter crop, which is estimated at 19.1 million tonnes.
Importance of Winter Onion Harvest
Winter onions contribute significantly to India’s annual onion production, accounting for 72-75% of the total output. These onions possess a longer shelf life compared to their summer counterparts, enabling storage and supply until December.
Direct Procurement from Farmers
To expedite procurement efforts, two state-backed food agencies, the National Co-operative Consumers’ Federation of India and the National Agricultural Cooperative Marketing Federation of India, have been tasked with directly procuring 500,000 tonnes of onions from farmers. This procurement process, facilitated through preregistration and direct benefit transfers to farmers’ bank accounts, aims to ensure swift and efficient transactions.
Replenishing Government Reserves
The government’s previous procurement efforts during the 2023-24 fiscal year involved purchasing approximately 600,000 tonnes of onions for its reserves. These onions were subsequently distributed in retail markets at subsidized rates to alleviate price surges resulting from supply shortages. With the buffer stock now requiring replenishment, the government is proactively engaging in procurement activities to stabilize onion prices.
Policy Measures to Address Market Volatility
Recent policy interventions, including export duties and minimum export prices, have been implemented to regulate onion exports and manage domestic prices. These measures were prompted by global supply constraints and adverse weather conditions, underscoring the government’s commitment to mitigating market volatility.
Addressing Cyclical Price Trends
Market analysts highlight cyclical fluctuations in onion prices, with periodic spikes attributed to poor harvests. Such price volatility underscores the importance of proactive government interventions to safeguard consumer interests and maintain market stability.
