Day 46 – Q 1.Examine the factors behind the rising prices of onions in India. What are the usual interventions that the government makes to tackle sudden spikes in food commodities? Examine.
1. Examine the factors behind the rising prices of onions in India. What are the usual interventions that the government makes to tackle sudden spikes in food commodities? Examine.
भारत में प्याज की बढ़ती कीमतों के पीछे कारकों की जांच करें। सरकार ने खाद्य वस्तुओं में अचानक होने वाले अवरोधों से निपटने के लिए कौन से सामान्य हस्तक्षेप किए हैं? जांच करें।
The fluctuation of prices of onions is a yearly phenomenon in India which hovers around Rs.100/kg in peaks and falls to even Rs.1/kg in times of oversupply. The issue as per the experts is due to the mismanagement of surplus than the shortage of supply.
Factors Behind increasing price of onions:
- Supply shortage: the following happened creating shortage in onions supply.
- Fresh onions are available from the month of January to May. The rest of the time is supplied from Rabi onions which comes from few states and mismanagement in stocks create supply problem.
- Delayed arrival of monsoon and in turn delayed sowing of early kharif crop which create shortage/delay in supply.
- Significant rains at the time of harvest of Andhra Pradesh and Karnataka crop in August/September which results in crop loss.
- Import of the onions were delayed due to delay in tender and also due to supply shortage from other countries.
- Government intervention were inadequate. A timely and flexible measures as per the demand and supply is needed which were not taken like
- Government did not increase stocks in spite of warning signs of supply shortage.
- The export restrictions were not imposed in time.
- Price stabilization fund (of around Rs.500 crore) is found to be inadequate to arrest the rising price by effective market intervention.
- Policy inconsistency: in terms of stock limits and export restrictions has resulted in limited players in the industry which creates the procurement and distribution problems increasing the prices.
- Inadequate storage, transportation facilities and improper distribution system.
- Cartelization: by the middle man creating artificial shortage in supply.
- High prices in addition to fear of even higher prices is leading consumers also to buy more than needed and hoard.
Government measures to address the issue of sudden spike in food commodities prices:
- Market intervention:
- Central agencies like Nafed and the National Cooperative Consumers’ Federation of India selling from the buffer stocks.
- Increasing supply through government designated markets like Rythu Bazaars of Andhra Pradesh, Mother dairy of Delhi etc.,
- Boosting domestic supply:
- Government ban exports or place limits in the quantity of exports to increase the supply in domestic markets.
- It imposes minimum export price (MEP) to check unrestricted exports.
- Restrictions on stock limits on hoarding by the traders and middleman.
- Imports: the government imports the food commodity in question to increase the supply as also being done recently to check onion prices.
- Long term measures:
- Reducing storage losses which accounts around 30% on average through constructions of cold storages, modern technology warehouses etc.,
- Schemes like Operation greens with the target to stabilise the supply of tomato, onion and potato crops (TOP crops) in India, as well as to ensure their availability around the country, year-round without price volatility.
- Agricultural market reforms like APLM act, formation of NAM etc.,
- Contract farming guidelines and streamlining to strengthen the distribution system.
Arresting the food prices fluctuations is prerogative not only for the consumers, but also is vital to ensure remunerative price for the producers(farmers) as sudden spike is usually ends up in massive price crash. Structural changes through reforms in transportation, market and storage is needed to address the issue.