India's onion crisis: shortages after the best-ever harvest

Tue Jul 8, 2014 7:05pm EDT
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By Rajendra Jadhav

PACHORE WANI India (Reuters) - Indian farmer Ranganath Watpade made a killing last year by putting off selling his onions until four months after he harvested them. This year, the same trick has backfired.

The country has produced a record harvest, but many farmers in the onion bowl of India's western state of Maharashtra have lost a large share of their crop damaged in storage, adding to the country's inflation woes.

A doubling in retail prices across major cities is especially troubling for staples such as onions, an ingredient that is present in just about every Indian meal.

Unseasonal weather, hoarding and price manipulation have in the past led to dramatic price rises, and the new administration of Prime Minister Narendra Modi is anxious to avoid the political fallout that has hit other governments over the cost of the food.

Supply shocks like these complicate the government's task of battling weak growth and inflation. It also underlines the irony of high food costs in India, which after China is the world's biggest fruit and vegetable producer.

Finance Minister Arun Jaitley's budget on Thursday will have to navigate through these issues as he must address inflation while steering away from populist measures such as food and fuel subsidies. Annual wholesale prices in May rose to a 5-month high of 6.01 percent.

Importing onions would be the only effective way to curb soaring prices, agriculture experts say, but similar steps in the past have failed to ease supplies.

"The only solution is imports, but that can't be done overnight," said R.P. Gupta, director at the National Horticultural Research and Development Foundation (NHRDF).   Continued...

A labourer stacks a sack of onions in a storage room at a wholesale vegetable and fruit market in New Delhi July 2, 2014.  REUTERS/Anindito Mukherjee