The rise of onion

prices 2010-11

TABLE OF CONTENTS

Onion market in India

Determinants of onion prices
What happened in 2011
Govt steps taken to tame the onion price
Effects after step taken by govt
Learnings
What Govt could have done

Onion
market in
India

Worlds
second largest
producer

Maharashtra
Indias largest
Onion
producing
state

Three main
seasons

Kharif
(Monsoon)

Late Kharif

Rabi (Winter)

Expenditure
on Onion
doubled

Common
man hit the
most

Common
man

20102011
Onion
crisis

Governme
nt

Blame

Politically
sensitive
issue
Traders
(hoarding
)

DemandSupply
gap

Determinants of onion prices

Man
mad
e
fact
ors
Sup
ply
chai
n
stru
ctur
e

On
ion
Pri
ce
s
Drou
ght

Govt
fact
ors

Lack
of
stor
age

Seasonality

prices follow a
cyclic pattern. Rise from july to
September
Drought conditions
Government and man made
factors government fix the
MEP,
MSPconsumers
tendency to hoard anticipating
higher prices
Supply chain structure
Lack of storage farmers
unload entire stock which in
turn creates a glut

What happened in 2011

December 2010 to January 2011 onion prices reached upto Rs

85 per kg
Late rains damaged part of crop in Maharshtra which is the
highest in terms of onion production.
Exports to Sri Lanka, Dubai & Bangladesh were continued
despite the domestic shortage
Traders delayed the delivery of onions to north & northeastern markets, increasing the prices further

Government Steps to tame the

onion price:

Discourage exports by asking NAFED and Other agencies to

suspend onion export
More than doubled the minimum export price
Attempted to augment supply of onion by eliminating the
import duty
Imported onion from neighbor country Pakistan

Effects after step taken by

Government:
Price came down to a desirable level
Government ended up rationing onions by limiting the supply
Government agreed to compensate the NAFED for 30% of the

losses
Government released Rs. 15 crore NAFED to subsidize onions

LEARNINGS
When the prices went high, onion as a good was perceived

differently by different socio-economic groups

Following the Law of Supply, sellers were trying to sell in the
market where prcies were high (export markets)
Both of these combined with rest factors lead to a Demand
shock and a Supply shock

What the Govt. could have done

Invest on cold storage

Curb influence of traders and middlemen

Improving e-auction to bring in transparency

THANK YOU