Hmmm ... so onions are in short supply! How do you get the private sector to produce more onions?
Set price controls forcing onion farmers to sell onions for a loss or make next to nothing on their crops? Of course not! This will be counter productive and cause farmers to stop growing onions, because the can't make money selling them.
Do nothing? which will allow farmers who grow onions to make big bucks do to the short supply. And of course without prices controls this will encourage farmers to grow more onions for the potential big profits which can be made from high priced onions. And in the long run this will probably cause the price of onions to drop.
Onion Price Surge Roils India
By ROMIT GUHA, ABHRAJIT GANGOPADHYAY And DIKSHA SAHNI
The root vegetable is the staple cooking ingredient for hundreds of millions of Indians, chiefly across a wide belt of the subcontinent's populous north. It has acquired legendary status for being not just the savory base of curries but also a slayer of governments, after a dramatic price rise in 1998 was credited with determining the outcome of elections in Delhi and one other state.
Today, its power as a political hot potato has re-emerged with a sharp price rise in the past few weeks. The crop has been severely affected by unseasonal rains in western states, the onion-growing heartland, with one key area's production down about 16%, according to government estimates. The price for a kilo (2.2 pounds) of onions at the vegetable market has jumped to about 70 rupees ($1.55), almost five times the usual price and roughly the same price as the more upmarket mango.
The onion's price surge also has come to symbolize a broader problem: Rising prices of all staples, including tomatoes, lentils and garlic, are taking a heavy financial toll on India's impoverished masses.
On paper, that toll would appear smaller than the popular uproar suggests. Onions represent just 0.18% of the wholesale price index, India's benchmark inflation rate. According to that index, food prices haven't been rising as fast recently as they did earlier this year—jumping 6.1% in November, compared with a 10% rise in October.
Some experts even contend there is little reason for alarm. Subir Gokarn, a deputy governor of the Reserve Bank of India, the nation's central bank, said Wednesday that the onion price increase will be "very quickly rectified either through a new cycle of harvest coming in or the immediate import."
But the onion's potency as a political symbol trumps pure economics. Its recent price rise has dominated the news for the past two days. "Ever Had Biryani Without Onions?" screamed the headline on Wednesday's front page of the Mumbai-based tabloid Midday.
A vegetable vendor weighed onions for customers at a wholesale market in New Delhi, Feb. 17, 2010.
The government has responded as if this were a national emergency. Earlier this week, it banned exports for a month. On Wednesday, it extended that ban indefinitely and scrapped customs duties on imports of onions, asking state-run trading agencies to import them.
Rahul Gandhi, general secretary of the ruling Congress party, sought to reassure the nation. "We are going to make sure prices are lowered; leave it to the prime minister," he said, according to news channel NDTV.
Prime Minister Manmohan Singh, for his part, has asked the agriculture minister to take the necessary steps to bring onion prices down, according to a letter from the prime minister's office released late Tuesday.
India is even looking to its regional rival Pakistan for relief. Pakistani traders plan to export 2,000 to 3,000 metric tons of onions to India to meet the shortage and already have exported around 1,000 tons in the past few days, said Abdul Wahid, a member of Pakistan's fruit and vegetable exporters association.
The government's concern isn't without reason. "If the government were to face elections anytime soon, it would surely get hurt," said S. Chandrasekharan, director of the New Delhi-based think tank South Asia Analysis Group, though he added that the government might not be damaged long-term because "the public memory is short."
The next major state elections are expected to take place mid-2011.
Mr. Singh's government already is facing severe criticism over recent revelations by a public auditing agency that an allotment of wireless-telephone spectrum in 2008 favored a few companies and caused a loss of as much as $40 billion in potential revenue for the government. The main opposition Bharatiya Janata Party and others managed to disrupt the entire winter session of Parliament, which ended last week, and have vowed to stay on the attack in coming months.
The onion's price rise has added another powerful weapon to the BJP's arsenal. Prakash Javadekar, a BJP spokesman, Wednesday blamed the onion price rise on government mismanagement and hoarding by traders.
Manish Tiwari, a spokesman for the Congress party, said the government is doing everything in its power to bring the price down.
That reduction can't happen soon enough for many households and onion sellers. At the Okhla vegetable market in Delhi on Wednesday, onion vendor Mohammed Chahvan lamented that until last week he used to sell daily about 30 bags, each containing 65 kilograms of onions. In the past two days, he has sold a total of about 10 bags, he said.
K. Bannerjee, a 71-year-old customer, said he was furious at the government's inability to control the onion price. "While onion and garlic are key items in Indian households, I can't believe that the country is short of stock," he said. "Since March, we have been hearing that the prices will fall but nothing has been done."
Others are finding cheaper alternatives. Dayal Singh, manager at Code, a Delhi restaurant, said his kitchen has switched to radishes in dishes, to try to replicate the onion's pungent effect. "We have to wait until prices come off by at least 40% from the current level to get back to our usual offering," he said.
Write to Romit Guha at firstname.lastname@example.org and Abhrajit Gangopadhyay at Abhrajit.email@example.com