The government is building a huge buffer stock of onions to control its prices, which have risen 48 percent, contributing to a higher inflation rate of 5.55 percent in November.
With general elections around the corner, the government has already banned exports of the edible bulb.
“We have made a huge buffer of 5 lakh tonnes and are continuing procurement of the commodity to take it to 7 lakh tonnes. We are also simultaneously offloading this buffer to bring down prices. The buffer is likely to be exhausted by late February and we expect prices to come down to Rs 35 per kilogram then, and further normalise to Rs 20 by March,” Consumer Affairs Secretary Rohit Kumar Singh told Moneycontrol.
Onion prices are currently ruling at an all-India average rate of Rs 55.12 per kilogram as on December 12.
Till date, about 5.10 lakh tonnes of onions have been procured and 2.72 lakh tonnes have been offloaded by the government in high price markets through open market sales and direct retail sales to consumers.
“We have a powerful buffer to intervene further because data shows that prices remain under control due to government-held buffers. Traders then know they cannot manipulate the market,” Singh said.
Export ban
To control domestic prices, the Centre initially imposed a 40 percent export duty on onions on August 19 and concurrently decided to procure an additional 200,000 tonnes of onions from farmers. However, on October 29, it additionally notified a minimum export price (MEP) of $800 per million tonnes (free-on-board basis) as prices did not drop significantly.
“However, despite MEP, we saw over 1 lakh tonne worth of exports continuing every month, as onion prices of other neighbouring countries remained high,” the secretary added.
The MEP was initially in place until December 31 but was extended to a total ban on exports until March 2024.
The rise in prices has been attributed to delays in kharif arrivals, export curbs by Turkey and Egypt, hailstorms during kharif crops, and high global retail prices due to concerns about availability.
Exports of this staple were finally banned after the retail sale price of the kitchen staple crossed Rs 80 per kg in the national capital while prices in mandis remained around Rs 60 per kg. Onion inflation in the Consumer Price Index basket has been in double-digits since July, reaching a near four-year high of 42.1 percent in October.
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