At least 2 more teary weeks for onion buyers in India

Onion prices in India may continue to rise for at least the next two weeks, as heavy late-monsoon rains are expected to delay harvests and worsen the shortage, potentially further pushing up food inflation, which is already at record highs in India.

Apart from the delayed harvest, speculative hoarding by traders and cartellisation have created an artificial scarcity of the staple vegetable, as onion is not covered under the Essential Commodities Act.

So when the union government and central ministers ask the states to crack down on hoarders, it is not a binding order but a mere suggestion, as there is no defined law to impose stock limits and no de-hoarding can be ordered unless a state passes a law to this effect.

In fact even the recent efforts by the government to import the critical vegetable have failed to bring down prices – reports say the onions from Pakistan, Afghanistan and Iran are being hoarded, and have brought no benefit to the consumer.

Retail prices of the vegetable soared to Rs70 a kilogramme in New Delhi this week from Rs20 rupees three months earlier, according to the consumer affairs ministry. Prices are up to Rs80 in other states like Maharashtra.

Surging onion prices may fuel inflation and continue to limit the Reserve Bank of India's room to ease interest rates to revive the weakest economic growth in a decade.

General elections are due in May; and the prices of a vegetable have made and broken Indian governments in the past. The bulbous flavonoid-rich root is a major source of nutrition for the poor, who use it as a raw side dish with flat bread (roti or chapatti) across the country.

Former Prime Minister Indira Gandhi swept back into power after a gap of three years in 1980 by turning the price of onions into a populist rallying cry. The Bharatiya Janata Party lost the state election in Delhi in 1998 as the government could not control onion prices.

Prime Minister Manmohan Singh's government last month asked state-run trading company PEC Ltd and the National Agricultural Cooperative Marketing Federation of India (NAFED) to import onions to control prices.

The PEC has yet to float a tender after asking suppliers to register with it, Ravi Kumar, a company director, told Bloomberg News. NFED cancelled a tender to import as there was a lone bidder, said S Biswas, a general manager at the New Delhi-based company.