1.  Non availability of economic loads at farm location. – Availability of onion is widely scattered in Maharashtra. Land holding of onion growers is very less. Most of the farmers own less than 1.5 acre land and due to unfavorable weather conditions even one vehicle of 15 MT is not available with a single farmer field at a given time. Non-availability of full truck load of fresh onions at a farm has led to concentration of onion trading at market yards. Ready availability of desirable onion lots at a market yard in case of a shortfall to make a truck load, is another big plus point. Secondly, procurement cost of small lots in a scattered environment works out to be very steep. So market yards and traders help in pooling of produce and provide infrastructure for standardized sorting / grading at one central location.

2.  Marketing produce as per grade necessity of a particular market. Each market has its own grade requirement for Mahrashtra onions. While eastern / Bangladesh / Bhutan / Nepal markets prefer small sized onions, North and West Indian markets prefer bigger sized onions. Traders buy small lots from the market yards and pool the produce for sorting / grading at their pack houses and sends different grades to different markets all over India depending upon the grade requirements and price at a particular market. Onion trading involves huge risk and in depth knowledge of distant markets. Lack of trading expertise, market knowledge and risk bearing capacity has prevented most of growers or their organizations to make a significant dent in onion trading in Maharashtra. So, most of the trading is in private hands.

4.  Non sustainability of exclusive onion Coops / Associations / Producer Companies. Because of various agro-climatic reasons, onion belt in Mahrashtra is actually a scattered chunk of large number of smaller sub belts, crisscrossing a distance of almost 1000 Kms plus. It starts with Karnataka border on one side and continues till MP / Gujarat border on the other end. It almost covers all western Maharashtra and Marathwada region. For a particular distant market, for example Bangalore, most of these sub belts are active for a short period as far as fresh onion flows are concerned. Active period in some cases is only a fortnight or a month. Because of this reason, exclusive onion coops / associations have not been successful as short period of business can’t sustain their year long expenses. Many coops were organized for the purpose of purchasing / selling onions but over a period these coops have taken other businesses (credit and inputs) and onion trade because of above said reasons have been relegated to the back ground leaving field open only to private traders. In my view, multi F+V items would have succeeded as unlike onions, revenue could be expected to flow round the year. (I am anticipating sustainability problem for the Associations that few retailers or processors has formed or may form in future over the years. Selling other F & V items like tomatoes, grapes, fresh vegetables etc. through Bombay / Delhi platform shall definitely help.

5.  Concentration of large storage capacities with traders. For historical and market reasons, large storage capacities for onions has remained with private traders. State Govt. and Central agencies have promoted small sized storage structures at farms which are not conducive to standardized sorting / grading at central locations by trained labor. Usually growers do sorting / grading on their own, using family and farm hands and are prone not only to errors but smaller throughput. Our recent experience of supervising sorting / grading at many locations simultaneously has not gone well from logistics point of view. Traders can buy the whole stored lots and provide sorted / graded produce to us as per our requirement at their risk and cost. We are trying to pass this role to Coops in addition to facilitating storage capacity build up at Central locations. Finance for establishing such facilities, working capital and risk bearing capacity of Coops / FPOs will have to be taken care off. (A separate post in this regard is being put up in coming weeks). Till then we may have to rely on traders or live with short supplies and / or poor quality produce.

6.  Non availability of sorting / grading facilities with Co-Ops / FPOs at farm locations. Generally traders purchase un-graded produce from Mandies, then they do sorting and grading. Efforts are being made to establish sorting grading centers with some identified Coops in local market yards but it will take some time. So to ensure quality and standard packing, material has to be arranged from the traders.

7.  Non availability of sale proceed in time – Can’t help but include this reason though it is very much under both organizations’ control. Major reason for antagonizing farmers or their organizations in not supplying their onion to retail organizations / processors is that they are not being conveyed sale proceeds sometimes even after 10-15 days. At Mandies they get the sale proceed (even lot wise) on the same day. In such a situation even traders will not be willing to give their produce for sale if we do not convey their sale proceed immediately on reaching of their vehicles at retailers’ end.

Looking at the situation I think it is pertinent that there are organizations who should provide advisory and service to farmers organizations in countries like India with small holdings to help them bridge these few bridgeable gaps.

Advances in information technology have generated enormous efficiencies in many industries, including retail, hospitality, transportation, communications, entertainment, manufacturing and financial services. Yet in marketing of agricultural produce, the largest industry of them all, innovation has lagged as growers, traders, agents, brokers, warehouse operators, logistics service providers, experts, and input suppliers have been slow to adopt new technologies.

This is because agriculture in general and marketing of agriculture produce in particular is often considered a relationship business. Indeed, the markets for agricultural produce could not function without networks of human force who have built trust working with each other over many years.

There is no good reason for Agribusinesses to operate without the benefits of faster and more accurate data, or the efficiencies afforded by workflow automation and online collaboration.

Fortunately, things are changing. Startups like Vegfru (backed by Wingify) have plans to democratize fruit and vegetable trade information by providing online access to buyers and sellers of fruit and vegetables in India. If Vegfru plans are to be believed, the founders are talking about not only supplying market information, credit, insurance, quality control, logistics and assorted services to sellers and buyers but also equipping them with software platforms to harness that data and run their businesses more effectively and efficiently. Growers, traders and agents with the best data ultimately make the most money.

Future is not hard to foresee. Suppliers and their agents who relied on pen and paper or static spreadsheets shall be able to access real-time information in cloud-hosted databases, and collaborate more effectively with buyers based on a common system of record. In addition, workflow automation software shall make them more efficient by eliminating the need for repetitive tasks that they previously did manually. Ultimately, these tools save them time and money, leading to leaner and more profitable businesses.

Why spike happened and some buzzwords that surrounded that spike?

First, some classical theory that explain such spikes in food commodities anywhere….

“Factors that could affect any food commodity prices can be broadly classified as either supply or demand. Total supply for any given period, a.k.a. the “amount on hand,” has two components: the new harvest and the storage from the previous period. While the amount of storage carried forward reflects some optimal decision from the previous period, the new harvest depends on the area planted and the current yield. The yield in turn reflects both technological advances and idiosyncratic factors, such as weather and seed / fertilizer cost etc. Demand also has two components: consumer demand, both domestic and export for current consumption and speculative storage demand driven by the prices at the time of storage, the storage cost, and expected future prices”.

My take – Onion price spike 2010/11 happened exactly as per the above written script.

1. Rabi storage in April / May was lesser than normal as prevailing prices in April when onion is stored were high.

2. Rains damaged the new harvest

3. Exports continued as if onion business was normal in 2010. Imports didn’t happen.

The buzzwords coined during the spike…

Onion Cartels

One need to find some evidence that supports the allegation that onion merchants anywhere in India colluded to hike the price which is necessary to prove a violation under our or any competition law. Direct evidences such as records of meetings, agreements by way of concerted action suggesting conspiracy, the fixing of prices, and the intent to gain a monopoly or restrict/eliminate competition, could have established the existence of cartelization. Sadly none of the agencies, Government or otherwise including media could provide that evidence during Onion crisis 2010/11.

Hoarding

That onion price spike happened during a period when the stored onion finishes and new fresh crop is arriving. It is a common knowledge in onion trade circles that fresh crop can’t be stored and the already stored crop which is at fag end of storage period can’t be stored further without additional damage, particularly in the traditional onion storage setups of India. Reportedly, simultaneous raids at all major onion production and trading centers by resource rich Govt agencies did not yield any evidence of trader collusion or any other misdemeanour like hoarding. You know what happened because of these raids – Here’s a secret or shall I say truth – Traders stopped onion trading, got the loaded trucks stooped mid-way, for fear of consequences. When you know that even 10 bags at one site would constitute hoarding, you are not a fool to be seen selling one truck (200-300 Bags) Result – dropped supplies – high prices.

Weather

Without an iota of doubt rains played the main spoil sport in onion price spike from November 2010 onwards. However, decline in the production by about 20% in the three major growing states during 2009-10 and 2010-11 due to unseasonal rains does not give a true picture of price spike.

The sharp rise in the prices of onions can be attributed to a decline in Kharif (Monsoon Crop) production on account of unseasonal rains at sowing, transplanting and harvest time in many production pockets in the major onion producing states across India was mainly responsible for price hike.

Though cursory rain fall data analysis for Maharashtra of that time supports this view, even the rainfall data, as presented by India metrological department doesn’t yield much clues as it is the rainfall intensity, its geographical spread, frequency of downpour and timing that matter most for rain fed Kharif crops.

Any significant shortfall or excess in rainfall intensity, its geographical spread, frequency of downpour and timing will spell doom for the onion crop.

Just to give an example if the rains come on time in June and then disappear for the next two months, and then again there is a heavy downpour in August, the average performance of monsoons would be termed near normal. But in the process, the entire freshly sown crop would have withered away necessitating either re-sowing at a higher seed cost or, for many abandoning the Kharif crop altogether.

On the other hand, excessive rains, as was noticed and reported by hundreds of farmers in four onion growing states, is equally true.

In my view onion price spike during December 2010 was a short-run price fluctuation which can be attributed mainly to sizeable, shock, significant weather related shock, captured by the deviation of actual market arrivals from expected arrivals of onion in assembly markets.

Exports & Price Spike

Right entry time and right exit time is important for any business. Onion exports from India no exception. Relation of exports with onion price spike fits perfectly with this contention.

A policy decision was taken by Govt on 2^nd November 2010 to reduce the minimum export price (MEP) of onions to encourage exports, in expectation of a drop in the prices of onions during the Kharif harvest. On the contrary, unseasonal rains in Maharashtra, Karnataka and Rajasthan damaged the Kharif crop, resulting in lower arrivals. This resulted in a spurt in onion prices leading to a decision to increase the

MEP (Minimum Export Price) declared by NAFED (Govt. of India backed agency) on 15th November 2010 to curb exports.

To increase the supply of onions in the domestic market, another decision was taken on 20th

December to significantly increase the MEP and the exports of onion were banned until 15th January 2011 due to the sudden spurt in prices. Further, on the next day, an export ban until further orders, was imposed by the directorate general of foreign trade. The ban on onion exports was subsequently lifted on 18th February 2011.

Ordinary decisions taken by extraordinary Govt. mortals. Right! But a careful look at above said dates shall reveal a lot about our lackadaisical approach towards onion export management and raises many questions like:

· Why MEP that was reduced on 2nd Nov was increased just 13 days later?

· Was expectation of price drop due to enhanced arrivals based on pure gut feeling or solid production facts (read crop damage due to rains) or some other reason that fitted well with vested interest of exporters / Govt servant

· My evidence at that time suggested it was crème de crème of onion export agencies that recommended cut in MEP. Those who recommended also included officials of agencies like NHRDF and NAFED who are supposed to be on top of everything related to onion production, arrivals and prices both domestic and overseas.

Media –  the proverbial whipping boy

Other than market integration, the simultaneous increase in the prices of onion across India can also be attributed to a phenomenon known as ‘price parallelism’. Price parallelism is a mirroring effect where traders independently pursue their ‘unilateral non-cooperative best response’ in view of what other rivals are doing. Therefore, there is neither an explicit agreement nor a tacit understanding among the traders.

Media played a very big role in promoting this pan Indian ‘price parallelism’, which eventually was played to hilt by all retailers.

Even otherwise media’s bias towards crisis that hit the demand side is clear as prices of onion crashed to Rs 6 to 8 a kg in the wholesale at Pimpalgaon (No 2 onion market town in India) during second week of February 2011 (just few weeks after the crisis) that farmers blocked roads and staged sit-ins for 10 days following a drastic downturn in the prices. Strangely this never made national news. Read the media role whatever way you want.

Central & State Govt Agencies – Were they also responsible for the spike?

Failure in predicting and preventing the onion price spike is how I would like to sum up in nutshell about their role.
To elaborate: With thousands of extension staff and machinery at disposal of State Agriculture and horticulture departments, MOA (Ministry of Agriculture) GOI (Govt. of India), these agencies could have predicted the reduced area under cultivation, arrivals and exact periods of shortage and taken corrective measures like reducing exports and initiating imports.

Who benefited most from Onion Price Spike? Good question!
All crises are good for business– Invest your onions.

Farmers

· Those who had the balance physical stock from last Rabi in hand. Not much though.

· Those whose fields had not damaged due to rains or water logging because of heavy rains. Majority of the farmers had however suffered extensive damage to their crops.

· Those farmers whose had planted late and their harvest came about during the crisis time.

· Those farmers harvested immature bulbs to make best use of crisis.

Incidentally this last factor also aggravated the crisis as immature bulbs have very poor shelf life and can’t be transported far away.

Retailers

· In my view they made the maximum money as their mark-up from wholesale prices were exceptionally higher and continued for prolonged period even when the wholesale prices had come down. Being price inelastic, there was no dip in demand.

· Just for example, Safal’s price (read price at quasi Govt shops) on 8th February 2011 in Delhi is Rs 23 a Kg when average price in Pimpalgaon on 8th Feb is just Rs 8.75 a Kg, an eye popping mark-up of 263%.

Wholesalers at assembly markets

· Those who had the balance physical stock from last Rabi in hand. Not much though.

· Those who might have re-traded the onion stock in assembly market itself without physical transactions and outside the APMC mechanism. No evidence though. You’ll need to think hard to visualize this phenomenon usually played in stock markets during old days.

Buying agencies to support Govt’s relief measures.

· Mandated by Central and State Govts to provide relief to customers by subsidizing onion prices, the agencies that purchased onion from assembly markets for organizations like NAFED and NCCF might also have made mullah from the crisis. It was alleged by many that that agencies responsible for buying this onion bought bad quality onion at higher prices. Circumstantial evidences also indicated that one of the agency responsible for purchase of subsidized onions had linkages with some Directors of NAFED.

How to prevent price spikes in future? Let’s do it some other time. As of now enjoy the crisis and let everyone invest their onions.

Over last couple of years, in addition to occasional consulting in fresh produce domain, I’ve been handling the legal, financial, accounting and admin work at Wingify Software Pvt. Ltd. which my son founded in 2010 with my active support as a Founding Director and presently as a CFO as well.

With our teams’ hard work and continued support of our patrons, Wingify, http://wingify.com, through its flagship product http://vwo.com, has now become a multinational software product company. We now have a wholly owned US subsidiary with an office in NY, few US acquisitions in our kitty and customers in 100 plus countries. In the process we have also now acquired good technology understanding and marketing experience for building and selling SaaS (Software as a Service) Products over internet, more so in B2B (Business to Business) environment.

Well, banking on my recent experience in establishing a 100 people – multiple locations – technology product company and my past experience as a domain expert in fruit and vegetable sector, I thought let’s marry these two strengths and give back the underserved fruit and vegetable category a modern technology lift.

The fresh produce sector has remained underserved by technology because of the trade complexity (read long chain of intermediaries, perishability, opacity, price volatility, liquidity, lack of standardisation etc), trade barriers of various kinds (trust and quality assurance apart legal and regulatory aspects), insufficient information on product and service availability, infrastructure bottlenecks and lack of right knowledge at the right time at the right place but more so because of low availability of people who could understand the finer nuances of both fresh produce trade and modern technology platforms and have the requisite match making skillset and expertise to build something for fresh produce business using technology.

Let me introduce the VEGFRU platform which is coming soon over Internet.

Our goal is to create a virtual World where anyone can freely trade products and services related to fruit and vegetables irrespective of geographic, cultural, regulatory, or logistical boundaries.
We aim to empower a new generation of traders and entrepreneurs to benefit from the wonders of trade over Internet by dramatically simplifying the process of discovering products and services related to fresh produce and their transactions while bringing down the overall cost and time.

We are going to be only tech-driven fresh produce company offering linkages to wide array of services related to sector – right from farm to kitchen in fruit and vegetable sector.
Backed by Wingify.com, India’s most promising software product venture, with footprints across 100 plus countries and 4000 plus customers including the likes of Microsoft, GE, Mitsubishi, ICICI Bank, Timesgroup, we’re a small team of technologists, fresh produce experts and customer experience fanatics operating out of a beautiful office in North Delhi.

We are currently pre- registering traders and service providers in following categories;

• Order Suppliers of Fruit and Vegetables for retail, QSRs, processors and others
• Consultants in food and agri domain
• Supply chain, Distribution and Logistics Services specialists
• Liaison specialists for Govt. Financial Schemes and Subsidies
• Crop Production experts of Fruit and Vegetables – all crops and discipline
• Agri Input suppliers
• Packaging experts for fresh Fruit and Vegetables / Processed and semi processed products
• Export / Import Facilitators
• Machinery and Equipment Suppliers
• Quality Control and Assurance specialists
• Cold Storage Space providers
• Dry Warehouse Space providers
• Agri Entrepreneur / Business Development experts
• Hi tech Agri Applications / Technology Platform
• Agro Finance and Financial services specialists
• Crop insurance specialists
• Fresh Produce Retail / e-tail companies and consultants
• Events and exhibitions.
• Agrometeorology and weather forecast
We have already started pre-registrations in the above said categories. My dear visitor if your profile fits into any of the above said categories than please feel free to call or email to Pooja Gupta for queries and pre-registration at following contact details.

Landline: 011-43401563

Mobile: +91-8527267888

Email: pooja.gupta@vegfru.com

Feel like dropping a mail to Founder…, please mail me, Anil Chopra at anil.chopra@vegfru.com

In the wake of onion crisis we were commissioned by a client to study all major onion markets all across India and come up with the genesis of crisis, particularly with regard to identification of competition issues.

Since the subject was of prime importance, your humble self took special interest in visiting some of the important the markets for discussions with various stakeholders, including the Govt. and quasi Govt. organizations across the whole value chain.

The current crisis made me dig up my archives and revisit the rough notes I prepared from my various interactions with a vide spectrum of people related with onion trade.

What follows are some unstructured observations, loosely termed as “Notes from the Onion Underground” on a market called Pimpalgaon in Maharashtra, an unheard of sleepy town near Nasik, perhaps a second most important market in India. 

I’ll not pass any judgment but leave it to my dear readers to make their own interpretations on what could have gone wrong except making a bold statement that a market is the combined behavior of thousands of people responding to information, misinformation and whim. In this onion markets are as efficient or inefficient as stock markets across the World.

Read on……

• Pol crop (late Kharif) damage all over Maharashtra, particularly Satara and Sangli belt and adjoining Karnataka was the real culprit last year (Nov –Dec 2010). Rains first in July Aug damaged nursery and again in Sept Oct damaged young crop – this crop was to supply onions in Oct / Nov. Rain fall data collected for the last year for these periods vis-à-vis normal rainfall is available for review and supported this.
• Strong need for good production, distribution planning was felt by all stakeholders to avoid crisis such as onion price spikes. Need to create capacity to hold.
• No evidence for hoarding as all farmers, traders and APMC officials were of the unanimous view that Heavy Rains at the time of transplanting (June / July) and Again on Aug / Sept in southern Maharashtra and Karnataka contributed very much for short production of Pol / Red onion crop which is normally harvested in Oct. This coupled with almost finished stocks of Unhali (Rabi) compounded the lesser arrivals.
• Last year rains played havoc both at the time of transplanting and harvesting, resulting in extensive productivity / quality loss at few farmers, particularly low lying where waterlogging was there. It was not the intensity of rain but the continuance of rains, even for 17 days on a stretch, which caused maximum damage.
• All agreed that continuing exports, media hype, raids by IT / CCI aggravated crisis.
• Most respondents including many farmers squarely blamed the Union Agri minister and Govt. official for manipulation in continuing exports. Other cited reasons were
• Failure of Govt. to pick production / arrival signals in time and take corrective action.
• Control Media hype.
• In time ban on export and initiate import
• Raids at market functionaries were counter productive
• Greed and gambling of traders
• Pimpalgaon is the market in neighborhood where commission agents collects up to 6% commission from farmers. At other markets it is the licensed buyers who take the commission.
• Though no evidence was available, there is a strong feeling that to get price arbitrage and risk appetite of some traders / buyers, onion passed through various hands after auction on mouth transactions only without any physical deliveries. Lot of gambling and speculation seem to have existed.
• Again no evidence existed but activity and number of village level traders increased in some onion pockets in Maharashtra (not visited though because of paucity of time).
• Because of increasing price trend, to make mullah, lot of farmers harvested even the immature onion resulting is further poor shelf life and quality.
• Trader lost much in one single day when because of greed. They bought at continually rising rate but next day the rate crashed by 8/10 rs. Even mother dairy official confirmed losing heavily on one single consignment but with an overall marginal gain.
• Traders did not agree to hoarding theory as pol (late Kharif) crop can’t be stocked because of high moisture content. But definitely transit stocks because of changing market scenario in distant markets played spoil sport in gains / losses of traders and other stakeholders.
• All agreed that select farmers and traders (who had stock either in hand or transit at any given point of time during the crisis) and practically all retailers, made the maximum money from crisis.
• Prices are normally high in Pimpalgaon because exporters who like good quality onion for their overseas buyers, frequent this market through their agents.
• Genesis of price rise at Pimpalgaon – The maximum prices were hovering between 1500 and 1800 per 100 Kgs prior to Diwali. Market was closed from 3.11.2010 to 9.11.2010. When the market opened on 10th Nov, the prices went up to 3200 per Kg and never looked back till situation eased around last week of January 2011.
• During the crisis Central Govt provided 20% subsidy to a cooperative (private?) to buy onion for Nafed and NCCF, who in turn supplied to Mother Dairy and sale through own outlets at subsidized pricing for one month. 1800 MT was supplied to Mother Dairy. It also came to our knowledge that cooperative’s chief is a present Director and ex-Chairman of NAFED. It was also alleged that cooperative purchased onion of bad quality at higher prices during the crisis.
• One of the greatest insight that came our way was that in Pimpalgaon Onion Trader Association is more powerful than APMC. To buy at Pimpalgaon you need to be a member of trader association and to become member of association you have to work with and buy through an existing association member for at least 2 years, pay him 1%, submit a bank guarantee to association. This association is presumably taking regulatory role of APMC to protect trader’s interest. Apparently APMC recognize all this and also collect and use some funds like Goraksha fund (no such fund in other markets) on behalf of this association. List of present 41 association members is available with us.
• Taking a Commission Agent license is not easy at a Onion market in Maharashtra . A case at neighboring new Moongsha market came to our notice where an outsider Maharashtra trader applied for a CA license but all market traders struck work (read market closure and farmer loss) for one month to prevent his entry. Later exchange of rs 15 lakh with right hands settled the matter in his favor.
• Onion freight rates increase during grapes and tomato season (Dec to June) as these are the preferred commodities where rates are higher.
• APMC flatly refused to provide market fee paid detail by individual onion traders and gave direct hints for not raking up the onion crisis issue with members.
• Traders operate under different firms for different jobs. Like a different firm to act as commission agent and a different firm to act as a forwarder. This look like a big manipulative act to transfer goods and money in an opaque manner. But this way they are also responsible for vertical integration of trade which is good in broader perspective. A matter for further detailed study by agri economists.
• Seed availability, supply and prices are important for next season’s crop – an important indicator that has been largely overlooked or grossly ignored by the policy makers.
• There are only 15-20 traders who are operating in market by paying 1% to association members in Pimpalgaon
• Sometimes the local Pimpalgaon traders also sell in neighboring mandis to get the price arbitrage. This shall distort the availability picture if the market arrivals are used to derive same. Traders (as buyers) usually do this when they have to purchase their farmers produce (as commission agents) at higher price just to retain and strengthen their relationships. To recover excess cost, they resell in other markets where prices are higher.
• When tried to get evidence on late delivery of trucks we asked the transporters about demurrage paid, all replied that this will not have any record either at source or destination as demurrage money is paid to truck driver in cash not as part of freight bill
• Best farming land is growing for grapes cultivation. Inferior usually allocated to onions.
• Farmers were unanimous in asking for MSP for onion.
• Mathari Union (labor) is very strong in Maharashtra. They struck work during Diwali period over a petty issue. With market closed, already inferior quality new onion perished at yard or individual farms. This strike was also responsible for reduced arrivals so high onion prices during last season.
• Genesis of Mathari union strike during crisis is also interesting. Earlier 2% quantity discount was permissible when farmer brought onion from auction to traders’ shed. One farmer slapped a court case and won. Ruling in Jan this year resulted in mathari strike as traders demanded exactly 50 kg filled bags which Matharies said they won’t be able to ensure because that involved extra labor so they struck work.
• Private market should have been at Chandwad. Premium market in Nasik is bad location where practically nothing except some grapes orchards are there. So it has just become a transportation and distribution centre not a market. May be land appreciation was the prime motive of promoters.
• Nov to April accounts for almost 70% of onion arrivals at Pimpalgaon. Remaining months contributes about 30%.
• One of the biggest onion commission agenr cum Trader favor formation of markets like SNX (now defunct) because that way he will be able to extend his reach, find new buyers, have guarantee in between and deal with Quality and educated people.
• At some smaller markets, big farmers also have started becoming traders and buy from markets to take price advantage at distant markets.
• Another big insight – Prices were high at the time of storage (April / May) so less onion was stored last year.
• Yet another useful insight – common to all farmers – While bigger and prosperous farmers can gamble, payment security is what brings small and medium farmer to a particular market or a particular commission agent, not price alone. Payment and its security is what brings a farmer to a particular market or commission agent.
• There have been few market failures like smaller markets like Jhodga and Deola where non or delayed payment to farmers resulted in farmers shifting to other markets. APMCs remained silent spectators – this role of ensuring payments to ensure survival of markets is now unofficially taken over by traders union. Call it entry barrier but for the good use. A matter of further detailed study by agri economists.
• Income tax raid were also reasons for crisis as traders in Delhi and elsewhere stopped the vehicles enroute fearing raids because IT officials may see working stocks as hoarded stocks. Truck delays deteriorated the already inferior quality resulting in losses to buyer or seller and resultant price hike.
• Earlier central Ministry of Agriculature used to fix export prices with input from two committees viz Price Advisory Committee and MEP committee. Now after the onion crisis this price fixation role has been given to Ministry of Commerce with MOA having only advisory role. This tussle between two central ministries is being perceived by concerned people as disastrous for Indian export industry.
• All Govt departments cut a very sorry figure of agri data collection and reporting process not only during crisis but during normal times also. Figures pertaining to same parameter as reported by various agencies rarely match.
• Trade processes are discouraging use of modern grading lines that delivers exact product specifications. Not successful unless all buyers ensure grading from all traders through machines only. Reason being – machines are meant for precision grading (45mm or below means as such while manually 45 grading shall also have 42mm plus – no one cares but this impact costing of packer who uses grading lines. is quality standardization good or bad is also a matter of further study in such circumstances
• In Kharif onion there is no control as sowing depend upon rains. Low productivity if no or less rains. 6-7 MT per acre. Delayed sowing of maize because of delayed rains shall impact next sowing of onions (another matter of study) as late sowing of onion shall result in less yield of onion.
• Excessive use inorganic chemical on onion production is there. There are subsidies on inorganic chemicals while none on organic (read farm yard manure)
• Few farmers did not sow this season by now because exports were irrationally stopped by Govt in Jan / Feb – one can never know if the ban shall be lifted or not. So uncertainty is bad for trade. This has made farmers very angry.
• As per many farmers and traders media is the biggest culprit. One farmer even said – No one ever died because of eating costly onions but many farmers have died because of low prices of onion. So why this noise over costly onions which made some farmers and traders get more money. They were of the view that consumers could have brought down the prices if they had stopped eating onions for few weeks.
• Farmers are most worried about price fluctuation. They want msp based on cost of production = at least 100% mark up over cost of production.
• Azadpur Delhi is not a preferred rail mode from Pimpalgaon. Excessive Handling and cost (loading and unloading +local tpt) from Patel Nagar onwards is the main reason.
• Another useful insight – when transported through rail – everyone knows who has loaded how much and sending where. So complete transparency is there, which is not good for trade from trader’s perspective. It is only much lower freight rates than road that compensates for this lack of opaqueness.