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Onion prices have witnessed a sharp and even doubled increase in several key markets across India. In Maharashtra’s Pimpalgaon and Lasalgoan Agriculture Market Committee, which is Asia’s largest onion market, prices surged from Rs 1,200 per quintal on August 5 to Rs 2,500 on August 9. The current retail prices of onions stand at around Rs 30 per kilo, with expectations of reaching Rs 60-70 per kilo by early September.
This price escalation is attributed to a combination of factors, notably speculative purchasing due to reduced onion acreage during this monsoon and depleted carry-forward stocks from the previous rabi season. According to the agriculture ministry, the sown kharif area for onions was 13 percent lower as of July 31 compared to the previous year, standing at 68,000 hectares. Independent farm sector analyst Deepak Chavan noted a significant drop of about 30 percent in onion seed sales this year due to lower rainfall in Maharashtra and other regions affecting cultivation.
Furthermore, stocks from the rabi season, which usually last until September, are expected to decrease sooner due to reduced production caused by high temperatures and unseasonal rainfall earlier in the year. As a result, the lean season is projected to extend by 15-20 days, leading to potential supply shortages and higher prices, as outlined in an August 4 CRISIL report.
Market experts have also identified hoarding as a contributing factor to the price surge. Traders are reportedly stockpiling onions in anticipation of an impending shortage. These storage practices are particularly prevalent in areas such as Pimpalgaon and Lasalgoan, where storage units are being expanded in anticipation of high demand.
RELIEF
While some relief is anticipated in October when the next onion supply is expected to enter the market, a significant price slump is unlikely. The CRISIL report indicated that annual onion production is estimated at 29 million metric tonnes, merely 7 percent higher than the average of the past five years. This suggests that price stabilization might not occur immediately, raising concerns about sustained price levels in the coming months.
