Govt fights inflation, farmers hit by tumbling onion prices

Tue, May 13 05:51 PM

As prices in India shoot over the roof, the value of a politically sensitive, perishable commodity has tumbled, troubling farmers whose pleas for aid have gone unheard as the government battles runaway inflation.

Onion prices have nosedived 82 per cent in the last seven months, as farmers boosted acreage due to higher prices in 2007, resulting in a bumper crop, but inflation shot up at an alarming pace during the period, aided by higher food prices.

"When we cultivated the crop prices were high. Good weather also supported production, but the onion price dip erased profits," said Yashwant Patil, a farmer in Nashik district, a key producing region in Maharashtra.

Wholesale price of premier quality produce in the country's largest onion trading hub, Lasalgaon in Maharashtra, has plunged 82 per cent to Rs 351 per 100 kg on Tuesday, from a peak of Rs 1,951 on October 1, 2007. But average price has fallen to Rs 180 in many spot markets during the same period.

Onion is typically cultivated thrice a year -- in monsoon, winter and summer. In 1998, the then ruling party, the BJP, suffered heavy losses in a key state poll, which was blamed by observers on high onion prices.

Rise in onion prices usually gives Opposition parties an opportunity to put the ruling front on the mat and gather votes in India. India's annual inflation rose to a 3-½ year high of 7.61 per cent in late April, helped by higher food prices.

"Arrivals have increased from all major producing states but demand was almost steady," Satish Bhonde, additional director, National Horticultural Research and Development Foundation (NHRDF), said.

India's onion output in the year to March 2008 was likely to rise 11.9 per cent to a record 7.45 million tonnes, according to NHRDF estimates.

"I didn't get production cost. I sold onion at Rs 2 a kg," said Vilas Dhomse, a farmer, who traditionally cultivates onion in Magrual village in Nashik district.

Production cost rose as fertilizer, diesel and labour prices soared, Dhomse said.

Farmers like Patil of Nashik were holding part of the produce, but said they have limitations in holding stocks as onion is a highly perishable crop.

"People use onion along with other vegetables. It is not a main ingredient. So if prices fall, we can't see a jump in demand," said D Y Bholkar, a trader.

Farmers protesting against lower prices blocked roads in parts of Maharashtra last week, demanding financial assistance from the government.

"Lower prices made us defaulters at the local co-operative society. It is not possible for onion farmers to repay loans," said Dhomse, who had taken a Rs 60,000 loan for cultivation.

"We were giving subsidy of Rs 50 per 100 kg to farmers who sold their produce in January to March," said S K Goyal, Principal Secretary, Co-operative and Marketing Department of Maharashtra government. The subsidy is not applicable for those who sold after March, he added.

The summer season onion crop account for more than 60 per cent of total produce, a major quantity of which arrives after March and farmers said they will not get benefit for a large portion of their produce.

Yogesh Kharate, another farmer from the Nashik, said, "Other crops are giving good returns and we have to think about them."

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