Eye-watering increase in onion prices causing tears in India

By Salil Panchal  /  AFP, MUMBAI

Sun, Mar 03, 2013 - Page 14

A cook tosses a generous fistful of diced carrots, cabbage and celery into oil crackling in a pan at a food stall on a Mumbai sidewalk, before reluctantly adding a meager sprinkling of onions.

“I just cannot afford to add more,” Govind Ram said as one of his chefs whipped up his signature vegetable manchurian dry — a dish reliant on a heavy dose of red and spring onions for its flavor.

Ram, who owns a street stall in southern Mumbai, usually uses about 45kg of onions a month.

However, with prices having more than doubled since the start of the year, he has had no choice but to rethink his ingredients.

At roadside stalls and supermarkets, customers are paying as much as 28 rupees to 40 rupees (US$0.55 to US$0.75) per kilo for onions, an eye-watering rise from December last year when costs were about 10 rupees to 15 rupees.

While food prices are up across the board, the cost of onions has increased more dramatically than any other staple, Indian government data showed this month.

“It really hits the lower-income [groups] very hard, who spend a sizeable portion of earnings on food. It is pinching them every day,” said Devendra Pant, chief economist with India Ratings, a branch of ratings agency Fitch.

Such high costs, along with general food inflation of approximately 12 percent, are a potent problem for the Indian National Congress Party-led government as it bids for a third consecutive term in a general election early next year.

Onions may not be the most vital source of nutrition, but they are regarded as essential to spice-loving palates, which — when dissatisfied — can play a crucial hand in politics.

In January 1980, former Indian prime minister Indira Gandhi strode back to power with the help of rising onion prices, saying that a government has no right to govern if it cannot control onion costs.

Eighteen years later, an election defeat for the ruling Delhi State government was blamed in part on a six-fold surge in onion prices.

Politicians are already falling out of favor with the latest price rises.

“The government just does not care for us or what we think,” said Sumathi Arogyanathan, a 45-year-old housemaid living in a Mumbai slum. “Earlier, several meals included onions for vegetables and the occasional fish. Now it’s just once a week. Now, often we have podi [a dry spiced lentil powder] instead of vegetables with rice.”

Traders in the western state of Maharashtra, one of India’s main onion bowls, say prices are up due to erratic weather, late arrival of supplies, sustained demand and rising production costs.

Yet a recent report commisioned by fair trade regulator the Competition Commission of India said traders’ cartels and hoarding were affecting the cost of onions, 15 million tonnes of which are normally consumed each year.

An “onion crisis” of soaring prices in 2010 saw Indian Prime Minister Manmohan Singh’s administration step in forcefully, banning onion exports, scrapping import taxes and even trucking in onions from archrival Pakistan.

This time, again wary of how onion prices influence public opinion, New Delhi is keen to be seen taking action.

Economists expected the government to outline some incentives or measures in the federal budget on Thursday in a bid to bring down the prices of fruit and vegetables.

“India has typically always adopted a ‘fire-fighting’ approach: When a fire erupts, we will douse it,” said Dharmakirti Joshi, chief economist with ratings firm Crisil.

Chief Minister of Delhi Sheila Dikshit has told the Indian Department of Food Supplies and Consumer Affairs to “take action against hoarders,” while Indian Minister of National Railways Pawan Kumar Bansal has promised more wagons to speed up supplies.

However, without long-term, systemic solutions, onion prices may stay high for some time yet.