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.

Bottlenecks are always at the top of the bottle, isn’t it.

You’ll say I am joking – No I was dead serious – That was part of the message I conveyed when I spoke on the subject at NCCD (National Centre for Cold-Chain Development), a Govt. of India organization now you know for what.

My intention through the following presentation was to use my own live work experience to introduce, rather awaken the audience, to the new discipline of packaging logistics and how it could fit in the reverse logistics for optimizing the fresh produce supply chain including refrigerated transport in India and also, to spell out boldly the bottlenecks of the “at TOP” kind. 

It will not be prudent for me to identify the “TOP” bottlenecks here as all were practically present at conclave as an audience.

However, I will be committing a crime of silence if I don’t tell you that last year, the humble self had approached “the Who’s Who” who mattered in streamlining the fresh produce supply chain in the country. the objective was to sell an idea for initiating or sponsoring a feasibility study for introduction of package pool system for few select big ticket items like tomato, mangoes and banana at the Pan India level.

Believe me I was hit by bottlenecks like a golf ball from one department to another. The last hit landed me in PLASTIC COUNCIL OF INDIA’s lap as if all matters related to plastic crates are council’s baby. On the contrary I was  that thinking the outcome of such a study sponsored by the boards / missions responsible for horticulture development, would benefit supply chain and marketing and eventually farmers, consumers and of course traders (including the organized kind) in India.

Hope some day before I die I’ll see a EUROPOOL like package pool system here in India also.

Disclaimer: I don’t represent Europool systems in any way whatsoever. 

A female physiotherapy intern was beaten and gang raped in Delhi on 16 December 2012, and dies thirteen days later while undergoing emergency treatment in Singapore for brain and gastrointestinal damage from the assault.

This incident has shocked India like none earlier. People from across the width and breadth of country came out on the streets demanding justice for the victim. The newspapers and TV channels till date are full of views and counterviews from all and sundry on how the rape could have been prevented had this or that action was implemented. Predictably, inefficient policing, soft punishment to criminals and slow judicial process were at the butt of all criticism.

Dear readers you may be wondering who is (or was) Ram Chand and what his philosophy has to do with rapes. Ram Chand was no philosopher but an under paid old gardener (mali) reporting to humble self at milk plant Bhatinda, a non-descript town in Punjab, way back in 1982. Ram Chand had nothing whatsoever to do with rapes as well. So what’s the point? To see the connection I’ll have to take you down my memory lane.

I had recently joined Milkfed at Milk Plant Bhatinda as a freshly trained quality control manager by NDDB. By virtue of my being a post graduate in Agriculture also I was given an additional charge as FDO (Fodder Development Officer), responsible for development of fodder crops / seeds in four districts of Western Punjab. Along with FDO came further responsibility of maintaining landscaping of 30 odd acre Milk Plant premises. Ram Chand was one of the 10 malis I had in my landscaping team. Though the landscaping job entailed very little time, energy and effort on my part and was on sort of auto mode, I found this work most satisfying and relaxing. It was this job, courtesy Ram Chand that gave me one of two most precious lessons I learnt during those four tough years in Punjab when Khalistani terrorists had a field day every day.

One fine day I was on the fortnightly inspection round when I found that grass was profusely coming out of one inch gaps in prefabricated concrete slab payment that connected General Manager’s residence within the milk plant with his office some 200 yards away. As both sides of the payment had well-trimmed Japanese grass, this unplanned profusion gave a very ugly look to landscape. I got very angry and summoned Ram Chand who was responsible for this section to my office. I must confess that on that day I was extremely angry and nasty at the old man. More so considering the fact that Ram Chand was the most diligent and punctual of all the gardeners.

Ram Chand kept hearing my shouts and staring at me stubbornly for a minute and then suddenly exploded. “Why you don’t you reprimand Ashok who is always inside GM’s house washing utensils and doing errands for GM’s wife.” “Who is Ashok? “We don’t have a mali named Ashok”. “And what that Ashok has to do with your negligence”, I shouted back. Ram Chand mellowed down a bit and retorted that Ashok is a sweeper who is responsible for cleaning the payment.

As it happened, the leaves of grass from Ramchand’s lawn mowing exercise on both side of the payment occasionally got swept away to non-concrete groves which remained un-cleaned for a considerable period. Grass started sprouting between the non-concrete gaps from those small un-cleaned shoots that settle in between the gaps.

“I will be only compromising my job Chopra Sahib if I waste my time in removing grass from these gaps also but the problem shall always remain as such if the stretch is not swept regularly”, was Ram Chand’s cool explanation.
A sudden reality dawned on me. That was my first exposure to value of Quality Assurance over Quality Control. Essence of zero defect concept. One need to identify the cause of an error and correct same before it blows up into a problem. Doing a right thing at the right place and right time always goes a long way in producing right processes or products rather than choosing best products or processes from a host of mediocre and substandard ones after running them through a long drill of quality controls.

Superimposing this incident with one that happened on 16^th Dec 2012 one can draw many parallels. One needs to thoroughly understand why ghastly rapes (grass sprouting within gaps) happens and nip the causes (sweep the payment) regularly to prevent the crime rather than asking for more and better police and judiciary (cleaning the gaps).

One need to fully comprehend what prompts apparently rational people (why men only?) go into that momentary lapse of reason and rape another individual? I know the answers are not easy to find but not impossible either. But one thing is surely certain – more and better policing / judiciary / strict punishment are not definitive answers. You can’t practically post policemen for each and every male (potential rapist) or female (potential victim) across the country. Perhaps, we need to take help from anthropology, sociology, psychology, history, biology and other disciplines to map the reasons and correct them at the right place and time to prevent future rapes.

May Ram Chand’s soul rest in peace?

P.S.: Ram Chand, unmarried, died of cardiac arrest at 60 before I moved to New Delhi in 1987.

Two days back I participated in a big debate on impact of recently announced FDI in retail on cold chain infrastructure in India. A specialty magazine for the distribution and logistics scene in India had organized this debate at one of the chambers of commerce in India. Three gentlemen including a self-proclaimed cold chain specialist, an omnipresent agribusiness consultant, a retired CMD of a nationalized bank, apart from yours truly, debated on the subject which was moderated by the editor of the said magazine. Cameramen captured the hot and cold moments of the proceedings for posterity.

Like always since 1987, the year I entered the organized fruit and vegetable industry, the discussion on the subject invariably turns to proverbial 30-50% wastage of fruit and vegetables in India because of absence and / or suboptimal presence of cold chain industry in India. This wastage story is so sticky that it has now become ingrained in minds of every one who has anything to do with food and agriculture in India. No points for guessing – FDI in retail was the only panacea for this ill called f+v wastage as per our self-styled cold chain specialist and the agribusiness consultant. But this is not what I want to discuss here. Though I have always contested the 30-50% figures as physical wastage for the simple reason that everything (all qualities and grades) sells and have a market in India. Overall value loss – yes, agreed or product specific wastages – like onion stored in a traditional way –yes, agreed.

Yes, it was the onions with documented 30% plus wastage during storage that started a chain of thoughts while I started driving back to my office. What follows are my instincts derived through my sectoral experience of fresh produce wholesale and retail in India.

Let’s come back to the title of this post. ‘Wastage is good”… Just visualize and try to create a scenario on what would happen if one fine day in Year 1 the wastage in onions during storage in Maharashtra / Gujarat etc somehow (let’s say because of technology intervention) gets down to zero to from 30%. What could logically happen?

1.  30% additional onion would be available in the onion trade pool.

2. Additional 30%, a huge quantity indeed, could theoretically crash the wholesale prices.

3. The dipped prices could perhaps be lesser then the production cost of onion resulting in huge trading loss to farmers. More suicides perhaps!

(I recalled what a Malegaon farmer told me when I did a onion research for NCAER / IDFC last year. His exact words were – No one in Cities has ever died of eating costly onions but low onion wholesale prices have definitely taken lives in Maharashtra).

4. Reduced storage capacity and unemployment in people associated with onion storage.

5. Extended storage could reduction of interstate movement of onion as geographical arbitrage would be missing which will also reduce the onion areas in States like Rajasthan from where onion starts arriving when onion in stores ends in Maharashtra.

6. Excessive onion dehydration because of excessive availability and resultant bubble as equilibrium of flakes market will be broken.

Till I reached my office I continued to weave plethora of scenarios around excess onion supply. You can perhaps add more. Eventually I could only reach to one conclusion that “Wastage is good” in case on onions in India. May be it is not the lack of capital, knowledge and resources that has prevented Indians into investing in Onion storage mechanisms that reduce wastage but have a potential to disturb the market mechanisms.

How I wish some econometric algorithm could churn up the most likely scenario in a situation of excessive onion in the market. Are you listening NCAER?

In a way the issue of more onion supply in not much different from excessive money supply. Excess money (current chairman of Federal reserve in USA would calls it quantitative easing – printing more money in bank’s printing presses at the most base level) can solve most of the issues at individual level but on a higher level, say a nation, more money can create as many complications not only for the nation but also global sometimes. There are many instances in history where too much money led to serious and damaging consequences, such a hyperinflation and assets bubble. The bubble in the property market in USA in 2008 that caused a butterfly effect across the World, was one such consequence of excessive money supply leading to lower interests in USA. Excessive onions are no different from more money supply.

I once again repeat – above said is based on my instincts. I have seen potato and onion rates crashing at the macro and micro level because of excessive supply in the wholesale markets.

Many a times instincts derived through experience are more accurate than research. I remember reading somewhere that test methodologies called agile and rapid, has lot to do with decisions based on instincts made on the fly. These are very effective methodologies. I just see a huge pool of information on food wastage which we need to mine to create more thoughts for food, particularly food for the farmers and by the farmers.

On a wintry evening in 2005 I had just arrived at Vadodra airport for the flight back to Delhi after finishing a meeting with a top (arrogant) gun at NDDB in Anand. I was in for a bad news when it was suddenly announced that all flights moving out from Vadodara were cancelled because of some unforeseen air force exercise in the vicinity of airport. While the passengers harangue with airline staff continued I sat sulking in the corner with the book I had purchased from Delhi airport in the morning.

Suddenly I saw silhouette of an old man with a slight limp with a hand on a young girl’s shoulder coming inside the departure lounge. Though I was too tired to ponder upon old men and young girls… when, lo and behold! Old man turned out to be Dr. Verghese Kurien himself. What a nice and pleasant surprise!

Despite the circumstances at airport, his presence somehow cheered me. I spoke to myself – here’s is the man who was responsible for making me, the only son, leave my home town, quit a well-paying State Government job and least of all make my father very angry and anguished for years to come.

Dear readers, you might be wondering how a renowned man like Dr. Kurien could act and behave in a way which is very much unbecoming of a gentleman. Read on…

We were following Americanized trimester system of education at Punjab Agriculture University, PAU for short – my alma mater. In fact trimester system was a misnomer because there was always summer session at the end of last trimester, each year for four years. This summer break was reserved by University for practical field trainings and study visits and of course many extracurricular activities.

One such study visit during summer break of 1975 took us, the young impressionable minds, to Anand to visit Amul and NDDB campus. By virtue of our coordinating professor’s brother, a senior official at NDDB at that time, a small lecture by Dr. Kurien, the then Chairman NDDB, was arranged for us. The lecture lasted for not more than 20-25 minutes but at the end of discourse I was so much impressed (or should I say corrupted) that there and then I decided that after completing my studies at PAU if I ever get an opportunity to serve directly or indirectly this gentleman called Kurien I will grab same no matter what ever the consequences.

During those years, pseudo intellectualism, the pop music, new found love for existentialist European literature and of course Ayn Rand had steered my mind in such a way that Dr. Kurien’s words “I always keep my resignation in my pocket” kept haunting me for long. Dr. Kurien had actually pulled out a piece of paper from his shirt pocket when he was extolling the virtues of integrity and trust in one’s own judgment in front of us.

I got this opportunity in 1980 and joined NDDB as an Executive Trainee meant for seconding in Punjab, my home state. To state that I got the opportunity would be an understatement – I was a serving Inspector, a prestigious and powerful Government post – and best of all stationed at my home town in my home state. Moreover, I was sitting on an offer to join as a Probationary Officer with State Bank of India, another prestigious offer which my father, an accountant by profession, would have loved me to accept. But dear readers, confiscating adulterated fertilizer and sanctioning fat loans was not for me – my destiny had already been written by man called Dr. Kurien.

I continued to serve NDDB and its affiliates like Milkfed, Mother Dairy, Safal and Safal Market till 2006. My exit from NDDB was also somehow programmed by Dr. Kurien.

Getting back to the Vadodra airport where I started this post, I could not stop my urge to meet Dr. Kurien and seek his blessings for the new Safal Market project that we were about to commission in Bangalore. I put up a cheerful face and reached the bench where Dr. Kurien was sitting motionlessly in deep thoughts. After excusing myself for the unsolicited interruption I introduced myself, my current project and also cheerfully narrated the above story of my joining NDDB. In addition I praised him profusely for having done so much work selflessly for the farmers and the country. Dr. Kurien kept listening patiently. While I was about to leave, he suddenly pulled me down towards himself and suddenly said, albeit out of present context “they are intent on throwing me out”. Such an anguish and pain could come only from a proud man. Knowing fully well the ongoing power tussle going on at IRMA and NDDB I humbly agreed to his point and moved back to my seat. However, that was the precise moment when I decided to call quits at NDDB. Enough of NDDB. Kaput. I reasoned that NDDB has lost its raison d’être and the pillar it was standing on.

I encashed the first opportunity Ravi Subramanian, the CMD of Subhiksha, gave me when he asked me to handle Subhiksha’s first ever fresh produce multi outlet retail venture in Delhi and other Sates of Northern India.

“I always keep my resignation in my pocket” kept haunting me for long. These powerful words still echo in my ears as I lay reading tributes paid to this gentleman who is no more.

Though Dr. Kurien was no longer part of NDDB since last so many years, but I am sure NDDB will continue to reap the goodwill created by Dr. Kurien’s and his charisma for time to come. Dr. Kurien’s legacy, placing the marketing tools in the hands of farmers and Amul’s legend will continue till the time people like me continue to replicate and perpetuate the Anand pattern though their work and consulting assignments.

Long live milkman of India!

India needs a hundred Kuriens. Any volunteers!