Decision to Import Onions Reflects the Government’s Anti-Producer Bias

The move itself reveals a deep-seated pro-consumer and anti-producer bias that has been, in large part, the reason for the agriculture economy being in doldrums.

New Delhi: The government has decided to import onions from ‘Pakistan, Egypt, China, Afghanistan or any other origin’, according to a Metals and Minerals Trading Corporation Limited notifications. Some concerns were raised about importing from Pakistan.

“And why import from Pakistan? Is the Indian farmer a bigger enemy?” farmer leader Raju Shetty was quoted as saying by the Indian Express.

But those concerns might be overstated as India-Pakistan trade remains suspended. In August, Pakistan suspended all trade with India. Earlier, in February India had hiked customs duty on all goods imported from Pakistan to 200%.

So, for onions to be imported from Pakistan it would require the government of India to do two things:

1. Ease the import duty

2. Request the government of Pakistan to allow export of onions.

Both seem unlikely and would probably be unpopular with voters. India can still import onions from other countries as the tender has kept that option open.

Also read: Bangladesh Faces Hike in Onion Prices on Floods, Lower Indian Supply

But the move itself reveals a deep-seated pro-consumer and anti-producer bias that has been, in large part, the reason for the agriculture economy being in doldrums. While the quantity to be imported – 2,000 metric tonnes – is only a few days’ worth of arrivals in the mandis of Maharashtra, the urgency with which the government, faced by a price rise, has acted is striking.

In Maharashtra, for instance, which produces about 30% of India’s onions, the wholesale price of the bulb has been on the rise. The average price rose 50% between July and August to Rs 1,802 per quintal. The upward trend has continued into September with the average price for the first 12 days of the month settling at Rs 2,267 per quintal.

Farmers wait for the auction of onions at Lasalgaon market in Nashik district in the western state of Maharashtra, India, December 19, 2018. Photo: Reuters

The rise in prices has been felt in the retail market with prices hovering at around Rs 40 per kilogram and even touching Rs 50 per kilogram in certain parts.

In steps the state with an intent to import onions. The Centre has also urged the Delhi state government to use the buffer stock and ensure that onions are not sold above Rs 23.9 per kilogram.

On the other hand, when prices crash in the wholesale market – as they have done for several crops in the last couple of years – the government response is much more muted.

“It clearly reflects the pro urban consumer bias of this government. When the price of onions was as low as Re 1 per kilogram, the government did nothing,” said political analyst and politician Yogendra Yadav.

In December last year, an onion farmer from Nasik found himself dominating headlines when he sent a money order of Rs 1,064 to Prime Minister Narendra Modi. That was the amount that he had received after selling 750 kilograms of onions in the wholesale market. This translates to Rs 1.4 per kilogram.

Also read: Onion Farmers Remain at Mercy of Market Ups and Downs as Prices Crash Again

The Wire had also reported at the time that average prices in major onion producing states were hovering around Rs 900 per quintal. In major mandis the prices were as low as Rs 300 per quintal. Individual farmers reported selling their crop at Rs 200 and Rs 300 per quintal. The cost of producing onions is estimated be around Rs 600 per quintal.

The sense of urgency with which the government has reacted to a price rise was missing when prices had crashed. It acted in late December, when it announced that farmers who had sold onions between November 1 and December 15, will be compensated at Rs 200 per quintal for a maximum quantity of 200 quintals.

Even with that compensation a farmer – and there were many – who sold at Rs 200 per quintal would have received a total of Rs 400 per quintal, still below the cost of production.

According to Ajit Nawale who is the Maharashtra state general secretary of the All India Kisan Sabha, even that compensation was paid to very few farmers. “There was very little evidence of that scheme on the ground. In effect, only a handful of farmers got that amount. The vast majority did not get that amount, which was very meagre to begin with,” he said.

The price crash continued beyond December 2018.  In January 2019 the average price in Maharashtra was, at Rs 517 per quintal, even lower than the average of Rs 624 per quintal in December. The crash continued with onions averaging Rs 423 per quintal in Maharashtra in February and Rs 552 per quintal in March.

But, the government did not take any other step to either address the price crash caused by a production glut or compensate farmers for the low prices that they were realising.

“This is a key feature of our governance. When prices crash farmers are supposed to fend for themselves. But, if prices pick up even a little then the government immediately intervenes to ensure that prices are kept in check so that farmers don’t benefit, and this is the story with every crop,” said noted agriculture policy analyst Devinder Sharma.

Photo: Reuters

The NDA regime has prided itself on its success in controlling inflation. After winning a second consecutive term in May this year, Narendra Modi bragged that this was perhaps the only election in which inflation was not an issue. Finance Minister Nirmala Sitharaman said in July this year that her government has not allowed retail inflation to ‘raise its dirty head’.

But, its desire to control inflation has meant that farmers have suffered as food products are a key component of the price index. Food inflation in the country has remained below general inflation for several quarters in the last few years.

For instance, the Indian Express pointed out in December last year, that for 27 consecutive months between September 2016 and November 2018, consumer food inflation was below general inflation. In February this year, the Hindustan Times pointed out that vegetables – such as onions – account for a large chunk of the falling food inflation. 

The decision to import 2,000 tonnes of onion (from countries other than Pakistan, effectively) is a minor move given the quantity. But, the motivation behind the move captures the government’s focus on controlling inflation which has contributed significantly to farmer distress and the dire situation of the Indian economy.