As the hue and cry over an unprecedented hike in onion prices hitting Rs 100/kg ebbs, MiD DAY makes visible the invisible hand of the market behind the rise

The onions don't make farmers cry. It is the trading and hoarding. And it works about as much to your disadvantage, as you found out in the never-before price hikes the humble crop underwent not so long ago.

In a set-up that leaves the producers and consumers outside the profit equation, prices of onions are determined largely by middlemen or brokers who purchase from farmers, MiD DAY's investigations reveal.



A farmer in Pimpalgaon in Nashik district, one of Asia's largest onion trading townships, barely makes Rs 300 after selling 10 quintals, or Rs 3 for a kg.

By the time the consignment reaches Mumbai, costs escalate. After prices for a kilo almost touched the three-digit figure two months ago, it came down to nothing less than Rs 25.

"There is no fixed MRP for onions," Pimpalgaon APMC Director Narayan Pote said wryly, "The trade is a victim of large scale hoarding which bloats up prices."

Findings

Grassroots research by MiD DAY indicates two inherent problems in onion trade in Pimpalgaon.

Firstly, it is an open market controlled by a group of traders having links with dubious traders in Mumbai. It is accessible to all actors and is purely governed by the cutthroat laws of demand and supply.
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There are days when more than 17,000 vehicles laden with onions show up at Pimpalgaon, resulting in prices crashing to as low as Rs 500 per quintal or Rs 5 per kg.

On an average about 15,000 trucks unload onions in the APMC market. Each truck carries between 250 to 1,000 kg of onions.

Sometimes, unfavourable weather conditions yield less output, resulting in prices spiralling upwards. Less onions mean more hoarding and extra income to the agents and brokers in Pimpalgaon.

Back in the city, to pile on profits, the wholesaler makes a killing. The retailer also corners a lion's share of income, sending prices soaring to Rs 40-Rs 60 per kg.

"Sometimes, prices plummet so low that growing onions does not make economic sense.

We have been requesting the government to allow exports so that prices stabilise and farmers can make a living," Pimpalgaon APMC Secretary Sanjay Patil said.

Secondly, as insiders pointed out, onion trading is similar to that of the stock market.

The agents in Mumbai keep tabs on developments like weather forecasts, festival demands and other parameters, which are passed on to the brokers in the onion belt.

They, in turn, quote prices to farmers according to their needs. This nexus works in a manner that excludes farmers altogether from the picture and is tailored to the needs of the intermediaries.

Farmer woes

The farmer, on the other hand, is totally at the mercy of the buyer when the produce is auctioned.

Any influx of onions in the marker takes away from the marginal profits he makes. He dreads to return with an unsold consignment even when prices offered are measly.

"Since farm produce is perishable, the farmer cannot store them. Transportation is another main area which makes inroads into his already low profit margins," said Eknath Uttam, a farmer from Pimplad near Nashik.
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"If the weather conditions have been extremely favourable for onions we make some money," he added.

Madhar Choudhary, a local farmer from Kanmandale, Chandor district, said that he invests Rs 5,000 to produce 10 quintals of onions but barely manages to earn Rs 3,000 after selling it.
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He manages to earn Rs 2/kg. "It is uneconomical and if the trend continues, I fear I will be out of business," said Choudhary.

Onion growers, to make a quick buck, often borrow from moneylenders and if they do not manage to make enough profits, they fear they will run into huge losses.

MiD DAY visited the house of a farmer at Pimplad. Living conditions were appalling.

There was no furniture or frills except an obsolete television. Jeans and fancy clothes are beyond their buying capacity. A glass of fresh milk and some freshly plucked vegetables are considered luxury.

"Everybody makes money except the farmer. The transport operator has increased his fleet of trucks from one to three.
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The trader dealing in fertilizer too has become rich. But we are becoming poorer by the day," Vasant Namdeo, a farmer, said.

In a month-long extensive campaign, MiD DAY will trace the tangle of farmer-middleman-hoarder-politician nexus that is ultimately leaving a sour taste in your mouth.

Cornered
The needle of suspicion points to a cartel with strong political connections locally and in Mumbai. "The system does not encourage any competition. The cartel carries out business at a loss to kill competition," said Kishore Gholap, an auction attendant at APMC.

Currently, onion is selling around Rs 40/kg in Mumbai, pointing to a possibility of heavy hoarding by wholesalers and traders.

Production costs
Rs 5,000 : Seeds
Rs 2,500 : Pesticides
Rs 6,000 : Fertilisers
Rs 16,000 for 40 labourers at R100 per day
Rs 1,000 : Storage bags
Rs 1,000 : Transportation
(Costs involved in onion farming per acre for 90 days)