Agri Food Markets and Value Chain Analysis - Project 1

Onion value chain analysis

By
D.Koushik(210804130107)
Gopichandu(210804130173)

Bsc agriculture student (UG), M S Swaminathan school of

Agriculture, Centurion university of technology and management,
Odisha, India.

Submitted to :

Dr.Grihalakshmi Kakani
Associate Professor
School of Management.Centurion university of technology and
management, Odisha, India
 Onion value chain analasis

Overview of Onion crop :

Onion (Allium cepa) has been cultivated on Earth for the last 5000 years.In India, onion is an
extremely important commercial vegetable, having both food and medicinal values.Indian
onions are famous for their pungency and are available round the year. India produces all
three varieties of onion – red, yellow and white.Onion is usually grown in the winter (rabi)
season; while in the southern and western states, it is grown In winter (rabi) as well as in the
rainy (kharif) seasons.India is the second largest producer of Onion in the world (20% of
global production) after China.In terms of area under onion cultivation, India stands first
among all nations.

Onion Production in India :

There are more than 12 lakh hectares of land under agriculture. About 25 percent of the world's
supply of onions, or 26.83 million MT, is produced in the nation. Maharashtra, Madhya Pradesh,
Karnataka, Rajasthan, Gujarat, Bihar, Andhra Pradesh, Haryana, West Bengal, and Uttar Pradesh
are the top onion-producing states in the nation. Nearly 90 percent of the nation's total onion
production is produced in these three states,

Major producing states and consumption centres for onions have been shown in below fig 1&2.
Maharashtra is the leading producer of onion in the country with a contribution of 31.4 % of total
onion production. Delhi is is one of the largest consumption markets for onions

Fig 1 :State-wise Onion Production

haryana
4% others
15%
Andhra pradesh maharash-
4% tra
31%
Bihar
6%

Rajasthan
6%
gujarat
6% madhya pradesh
karnataka 15%
13%
 Fig:2 Major production and consumption centres for onions in India :

Onion Production in Maharashtra : Nashik, Ahmednagar, Pune, Satara Solapur, Dhule,

Jalagaon, Osmanabad, Beed, Aurangabad, Bhandara, Nandurbar and Latur are the major onion
producing districts of Maharashtra.

Onion value chain at Nashik(Maharashtra) :

Costs and margins of onion value chain from producing regions to Delhi :

Cost and Share inconsumer rupee

Stakeholder
margin/Quintal (%)
1. Price received by farmer (From
701 29.1
Agmarknet)
2. Total trader's cost 417 17.3
3. Trader's margin (4-2-1) 164 6.8
4. Delhi wholesale price (Max price
1282
from Agmarknet)
5. Semi wholesaler total cost 265 11
6. Semi wholesaler margin (10%) 128 5.3
7. Price to retailer 1674
8. Retailer cost 150 6.2
9. Retailers margin (10-7-8) 587 24.4
10. Price paid by consumers (Delhi
2412 100
retail price)
To estimate farmer’s share in consumer rupee for onions, Delhi is considered, which is one of the
largest consumption markets for onions . Depending on the season, there is a lot of volatility in
the returns and margins of each stakeholder in the value chain. So season-wise weighted average
of prices for three years (2016–17 to 2018–19) is considered to calculate price received by
farmer. Retail prices have been taken from Price Monitoring Cell, Department of Consumer
Affairs (DoCA), and not from National Horticultural Board, which does not have a standard
method of collecting retail prices. As Delhi’s wholesale price is the average wholesale price of
onions of all qualities arriving from markets across India.

Table 1
Based on the prices, costs and margins given above, the farmer’s share of the consumer’s rupee
works out to 29.1% and for retailer’s it is 30.6% (Table 1). During a glut, often farmers are not
able to cover their cost of production. The costs and margins of other stakeholders are based on
interactions with traders, commission agents and wholesalers. Hence, it is likely that these may
not reflect the true margins, due to reporting biases

Onion Processing and Value Chain products :

Fresh onions can be processed into a number of dehydrated forms like onion flakes, powder,
granules, etc. However, there is very low demand for these products domestically, as Indian
consumers are used to fresh onions. India produces about 75,000 MT of dehydrated onions,
which is about (3–4)% of total onion production. Processed onions largely cater to the export
market (80–85%) and the rest is mostly consumed by the domestic food industry. A majority
of the dehydrated onion units in India are located in Bhavnagar district of Gujarat, with a
high concentration in Mahuva.

Dehydrated onions are an important product in world trade and India is the second largest
producer of dehydrated onions in the world. Dehydration increases the storage period of
onions and makes them available throughout the year including in off-season, and also
supplying the important nutrients in a concentrated form, Another advantage of dehydrated
onions is that they are easy to store, being lighter in weight and smaller in bulk than fresh or
other processed onions.

Onion Marketing Chain-Bhavnagar district of Gujarat :

Porter's concept Value Chain of processed Onion :

Swot Analysis :
Strength is the availability of appropriate inputs, the availability of water for irrigation, and
the Availability of appropriate production technologies. Onions are a versatile ingredient
used in a wide range of culinary dishes .Onions have a relatively long shelf life when stored
properly, making them accessible year-round.Onions are relatively easy to cultivate and can
grow in various climates and soil types.

Weaknesses like lack of knowledge or use of grades and standards for onions, Lack of
effective communication among value chain actors and other stakeholders low prices to
farmers due to over-supply, poor organization of farmers, and limited production season for
local onions.

Opportunities are the Adoption of improved technology for onion production and post-
harvest can improve yields and marketable production; the potential to significantly increase
local production to supply the market; enforce existing regulations and standards. nions are a
valuable agricultural commodity and can be exported to international markets, contributing to
economic growth in onion-producing regions.

Threats are they are low wholesale prices during the harvest season; contraband onions
threaten the viability of local production. adverse weather conditions . onions are susceptible
to various pests and diseases, which can reduce yields and quality if not managed
effectively.price fluctuations may impact profitability for onion growers

Reason for the price volatility of onion is Delay in monsoon, Drought, Excessive Rainfall
and Delay in the harvesting period, and Government effort like the Import of onion,
Restriction the exporters, and Maintaining buffer stock.

Challenges :
1. Low productivity and low seed replacement ratio.

2. Inadequate storage facility.

2. Inadequate storage facility.

4. Market reforms and market infrastructure .

5. Absence of agri value chain finance.

 6. Inadequate crop loan .

7. Absence of warehouse receipt financing .

8. Absence of informational flows / demand forecast.

9. Government’s export policies .

Statergies for overcoming challenges :

 Commercial seed production and seed replacement ratio are to be improved. Banks
need to step up their credit to commercial seed production and term loans which will
augment asset creation and improved productivity.
 Lack of storage facility is one of the prime reason behind high volatility in onion
prices. Additional storage facilities may be planned to store rabi onion (storage
facilities to store at least 25% of rabi onion production need to be ensured in all major
onion growing taluks).
 . More onion processing industries can be set up here which will spur contract
farming. Banks may scout for such projects which will encourage farmers to cultivate
other types of onion (white onion) in the region.
 The APMC markets are characterised by poor competitiveness, inefficient and having
scope frequent price manipulations. The traders are having asymmetric power in their
favour while trading. The e-NAM model which is supposed to overcome these
problems is yet to be implemented. Quick implementation of e-NAM in the onion
markets will enable better realization for farmers
 There is no grading and sorting facility available at the market yard which hinders the
farmer in getting remunerative pricing. Hence, the farmers are not able to good
remunerative prices. The market yards may be equipped with state of art of storage
facilities so that farmers / traders may grade, sort and store their produce after paying
appropriate rent.
 A mechanism of providing pledge finance to farmers to hold onion at the farm for
longer period will help in getting remunerative price to the farmers and avoiding
undue shortage in lean season.
 A stable export policy regime will aid in reducing the volatility.

Export Potential of Onion from India :

There is a good demand for Indian onion in the world and India exported around 1.8 million MT
of fresh onion during 2015-16 worth ₹ 32.3 billion; and 3.5 million MT of fresh onion during
2016- 17 worth ₹ 46.5 billion. Maharashtra contributes approximately 80% to the Indian onion
exports. Major export destinations are Bangladesh, Malaysia, Sri Lanka, UAE, Indonesia,
Pakistan, Nepal and Singapore

USA, Canada, UK, Germany and other European countries are among the biggest onion
importers in the world, but India exports a miniscule quantity to these countries, mainly due to its
crop not being able to meet their trait requirements in terms of pungency, size, colour etc.
However, in order to improve the overall export price realisation per tonne, it is necessary to
explore the potential in these markets, and possibly produce the variety for these niche markets.

Exports of fresh onion from India are permitted by the Government only after meeting the
domestic requirements, which leads to fluctuations in the exports volume and value. Due to the
strategic significance of onion, the Government often intervenes in the market by way of
Minimum Export Price (MEP) — the least price at which a commodity can be exported-- to
regulate the domestic prices and safeguard the interests of domestic consumers. The MEP was
introduced in onion export in 2010 as a policy measure to control the rise in price of onion in
domestic markets.

In addition to exporting fresh onion, India also exports roughly around 50,000 tonnes of
dehydrated onions annually. This constitutes around 85% of the 60000 tonnes of production of
dehydration units, while the balance 15% is consumed by domestic wholesale consumers.
Dehydrated onions constitute more than 80% of the exports of dried & preserved vegetables. As
the dried onions are a different variety than those consumed by Indian households, its exports
does not impact the domestic prices. While the share of household consumers is negligible.

conclusion :
In India, Maharashtra produces more than a third of the total production. Whereas in Gujarat,
Bhavnagar contributes almost half of the total production.And Delhi stands in 1st place in onion
consumption . After harvesting, proper curing and grading are the keys to getting a better price
for onions in the market, and proper packaging and handling can reduce the loss of onions in
storage. In the months of April and May, the production of onions is high, which leads to a
decrease in the price of onions and increased exports in that period. The major exporting
countries require small-sized onions, so we suggest to farmers the growing of Agri Found Rose
and Arka Bindu variety of onion
References :
1. “Agricultural Value Chains in India: Prospects and Challenges” - Saurabh Kumar* and
Aparna Sharma (2016) and Ministry of Food Processing Industries- Government of India.
2. http://apeda.gov.in/apedawebsite/
3. https://www.business-standard.com/article/markets/transparent-derivatives-
mechanismproposed-to-arrest-onion-price-volatility-11710120075
4. Agmarknet Wholesale prices. Directorate of Marketing & Inspection (DMI), Ministry of
Agriculture and Farmers Welfare, Government of India, New Delhi
5. nhrdf.org / indiastat.com
6. Data from Agmarknet,Retail prices have been taken from Price Monitoring Cell, Department
of Consumer Affairs (DoCA)
7. NHRDF (2018) National Horticultural Research and Development Foundation, Nashik
8. NHB Indian horticulture database. National Horticulture Board, Government of India, New
Delhi
9. Onion Value Chain Analysis in Gujarat. Yuvrajsinhji H Vaghela and Prof. N.M.Thaker P G
Institute of Agri-Business Management, Junagadh Agricultural University,
Junagadh( ARTICLE ID: 27)
10. NABARD- Onion Supply Chain Analysis: Constraints and Way Forward_Dr Sohan Premi
and Dr B R Premi_ June 2017
11. NHRDF_ various publications including annual reports and technical bulletins onOnion
production in India