The Modi government had come to power by promising to curb rising inflation but surging prices of food items, potato and onion has become a huge cause of concern for the centre. Higher potato and onion prices pushed up food inflation to 9.50 per cent in May from 8.64 percent in April. Even though there is no shortage of onions due to good harvest but speculations about an average monsoon and flash strike by traders in Nasik which has been called off were responsible for the price rise. Thus the rising food prices have become a major challenge for the government.
45 per cent of onion produce comes from the states of Maharashtra and Karnataka and if supplies from these two key states are hit, onion prices tend to rise. Traders have already started hoarding onion stock and are anticipating a price hike in the future. Onion prices are likely to increase further if the government fails to take necessary steps to control it. Every year onion prices increase due to shortage of supply and this year too the situation looks no different.
Spot onion at Lasalgaon, India’s largest onion market stood at Rs. 1,250 a quintal on Monday, up 22 per cent from Rs. 1,025 on June 2. Potato prices too increased by 18 per cent in Mumbai to Rs. 1,850 a quintal respectively during the past fortnight.
“Even though there was some damage due to pre-monsoon showers during February-April this year, there is no shortage of onion in the market. It is more of a psychological factor that has caused a buzz about price rise,” RP Gupta, director, National Horticultural Research and Development Foundation (NHRDF).
At present a kilogram potato or onion costs anything between Rs. 20 to 25 in the retail or vegetable markets of the state capital, which was just around Rs. 16 last week.
Finance Minister Arun Jaitley, who is expected to deliver the government’s first budget in the second week of July, blamed “speculative hoarding” on fears of deficient rainfall for the rise in food prices.
Agriculture secretary Ashish Bahuguna talked to senior Maharashtra government officials. “We have learnt that the state has informed the Centre that there is a local problem in Nasik market and it would be resolved soon. Though such an issue does not impact prices across the country, we are not taking any chance,” an official said.
The weather department has predicted below average rainfall between June-September this year, which could hit summer crops such as rice, corn, soybean and cotton, exacerbating price pressures and impacting economic growth. Summer monsoon rains are vital for 55 per cent of the country’s farmlands that lack irrigation facilities.