After tomatoes, onion prices set to pinch households

Amid prices of tomatoes and spices hitting the roof, another key kitchen staple, onion, is set to pinch the pocket of Indian households with prices estimated to hit Rs 60-70 per kg in September due to lower sowing in Kharif season and storage related issues.

According to a ‘topical analysis of food prices’ report released by research and analytics firm CRISIL, the supply-demand imbalance is expected to reflect in onion prices towards end-August.

“As per our ground interactions, prices are expected to show significant increase from early September in the retail market, reaching up to Rs 60-70/kg during the lean patch,” it said.

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There are two main reasons for the possible surge in onion prices. First, low shelf life of onion produced in rabi season, and the second, poor sowing in kharif season.

Unseasonal rainfall in the key growing regions during March affected the quality of onions and reduced the shelf life of rabi onion from 6 months to 4-5 months, raising storage concerns and induced panic selling among farmers.

Rabi crop, which is conventionally brought in the market from March, was harvested early this year and started trading in February. Supply of onions in the market in February this year was 12 per cent higher when compared with the previous year.

This led to a crash in the prices. Retail price of onion in February this year was 32 per cent lower when compared with the same month last year, as per the Consumer Price Index (CPI) based monthly inflation data released by the central government. Onion price in March was 21 per cent lower, in April 13 per cent lower and in May 2 per cent lower on a year-on-year basis.

However, this trend reversed in June with an increase of 1.65 per cent on a year-on-year basis. Retail inflation in onion was in the negative zone from September 2021 to May 2023. July inflation data is scheduled to be released later this month.

Broadly there are three onion growing seasons in India – kharif, late kharif and rabi. Around 70 per cent of the total annual onion output comes from rabi crops.

Crash in prices of onion produced in rabi season, dampened farmers’ sentiments leading to lower sowing in kharif season.

According to CRISIL research, in terms of acreage onion sowing in this kharif season is likely to be 8 per cent lower when compared with the previous year, while production will decline by 5 per cent year-on-year.

The prices are expected to remain elevated until the arrival of late kharif varieties in the market, “in a throwback to the tomato story for Indian households,” CRISIL noted in the report.

Tomato prices have surged in recent months largely due to supply disruptions. Tomatoes were sold at Rs 259 per kg at Mother Dairy’s Safal retail stores in Delhi this year. The prices have hit record high across the country in the recent weeks and are estimated to hit Rs 300 per kg.