Increased Procurement Prices and Expanded Cultivation Mark Government’s Strategic Move Ahead of Assembly Polls
In a significant policy shift aimed at stabilizing domestic onion prices and supporting farmers, the Indian government has announced a substantial increase in the procurement price of onions from Maharashtra. This strategic move, occurring as the state gears up for assembly polls, raises the procurement price by 74% compared to the previous year.
An official from the government stated, “While last year, the average rate at which onions were procured was Rs 16.93 per kg, this year, procurement is happening at around Rs 29.5 per kg via direct benefit transfer (DBT).” This price hike reflects the government’s commitment to ensuring fair compensation for farmers amidst fluctuating market conditions.
Significant Financial Commitment
The government’s expenditure on onion procurement from Maharashtra is projected to reach Rs 15 billion for the current financial year, up from Rs 12 billion last year. This increase underscores the government’s proactive approach to managing food costs and inflation, particularly in the wake of last year’s price surge in August, which led to a temporary ban on onion exports.
The export ban, while controversial, aimed to moderate domestic prices and ensure affordability for consumers. Critics argued that it restricted farmers’ access to lucrative international markets. However, the government maintains that such measures are necessary to prevent retail price volatility and inflation spikes.
Buffer Stock and Market Intervention
To further stabilize the market, the government plans to procure 500,000 tons of onions to maintain buffer stocks. This initiative will be jointly managed by the National Cooperative Consumers’ Federation of India (NCCF) and the National Agricultural Cooperative Marketing Federation of India Ltd (Nafed), with each organization tasked with procuring 250,000 tons.
This buffer stock strategy is intended to facilitate market interventions when necessary, ensuring that sudden supply shortages or price spikes can be mitigated effectively. The increased buffer stock will provide a safety net for both consumers and farmers, offering price stability and income security respectively.
Expanding Cultivation Beyond Maharashtra
With retail onion inflation rising by 38% year-on-year in May, the government is also encouraging the expansion of onion cultivation beyond traditional strongholds like Maharashtra and Karnataka. This diversification is expected to enhance supply resilience and reduce the risk of regional production shortfalls impacting national prices.
The official anticipates that “10,000 farmers will benefit from rabi procurement of onion in 2024 against last year’s 6,100.” This expansion is not only a step towards greater agricultural productivity but also a measure to support a larger number of farmers across different regions.
